Issue Spotlight: Title II and Net Neutrality

• To the extent it is necessary at all, public investment in broadband infrastructure should focus on providing internet access to those who don’t have it, rather than subsidizing competition in areas that already do.
• Highly prescriptive mandates—like requiring a particular technology or requiring symmetrical speeds— will be costly and likely to skew infrastructure spending away from those in unserved areas.
• There may be very limited cases where municipal broadband is an effective and efficient solution to a complete absence of broadband infrastructure, but policymakers must narrowly tailor any such proposals to avoid displacing private investment or undermining competition.
• Consumer-directed subsidies should incentivize broadband buildout and, where necessary, guarantee the availability of minimum levels of service reasonably comparable to those in competitive markets.
• Firms that take government funding should be subject to reasonable obligations. Competitive markets should be subject to lighter-touch obligations.

Read the full brief here.

The 117^th Congress is considering whether to devote significant federal resources toward promoting broadband access in underserved communities. Legislative proposals to do so include President Joe Biden’s draft American Jobs Plan—a $2.3 trillion budget-reconciliation package that sets aside $100 billion for broadband infrastructure. They also include the Accessible, Affordable Internet for All Act, which would create a $79.5 billion federal program.

The instinct to promote network buildout is understandable, particularly in the wake of the COVID-19 pandemic and the various socioeconomic disparities it highlighted. But precisely how that infrastructure funding is deployed will determine whether such proposals succeed or fail.

In fact, the U.S. broadband market is already healthy, and in most cases, competitive outcomes are close to optimal. Charges that broadband markets are dominated by monopolies or oligopolies and that they are therefore stagnant, over-priced, and of low quality do not comport with the empirical and economic realities. To take but one example, even with the overall rise of prices across the economy, and in the face of surging demand during the COVID-19 pandemic, U.S. broadband prices fell.

Concentration is a poor predictor of competitiveness, and broadband markets with even a small number of competitors can be—and are—quite healthy. Indeed, the multi-year, multi-billion-dollar investment plans broadband firms execute—amid constant pressure from alternative modes of Internet access like 5G, fixed wireless, and satellite—tell the story of a highly competitive, dynamic market.

To be sure, there are a few areas where there has been no meaningful wireline broadband buildout: Approximately 4.4 percent of the U.S. population does not have access to at least 25/3 Mbps fixed service. Even then, however, many of those areas are served by wireless Internet service providers (WISPs), cellular broadband, and/or satellite service.

But while the digital divide—both rural and urban—may be real, that fact alone does not justify wholesale intervention into broadband markets. Instead, the actual scope of the problem should be assessed, and policies tailored to remedy specific needs. The policies required to reach that stubborn 4.4 percent tail of broadband rollout are likely to be very different than those that facilitated the buildout of the first 95.6 percent.

Policies designed to close the digital divide should have two broad features: they should reach consumers where they are, and they should not disrupt the otherwise healthy broadband market. Reaching consumers where they are means targeting subsidies directly to consumers to make it more viable for existing providers to build out into new areas. Such policies should be technology-neutral and designed to stimulate demand to jumpstart markets that have otherwise proven too costly for any provider to enter. Avoiding disruption of healthy markets entails refraining from interventions that artificially introduce new competitors, skew investment planning by broadband providers, or dictate how and where providers should build networks.

There is much that can be done to encourage better and timelier broadband rollout, but not all solutions are equally effective. As we detail below, policymakers must choose carefully among competing options to realize the best possible result.

This paper aims to address common misconceptions associated with broadband competition that, in turn, undercut practical solutions for connecting the unconnected. It first details some of those misconceptions and contrasts them with the realities of current broadband markets. It then provides an overview of how to properly understand healthy competition in local broadband markets. It then provides a critique of commonly advanced proposals that are based on fundamental misunderstandings of how broadband markets work. And finally, it offers an approach to policy that incorporates a variety of solutions for connecting the unconnected.

Read the full white paper here.

* NOTE: Section 1.b was updated July 13, 2021, to reflect feedback regarding the paper’s interpretation of certain relevant economic studies.

Summary

“We are professors and scholars of law, business, economics, and public policy with expertise in communications, competition, innovation, industrial organization and related fields. We write to express our concerns regarding the Federal Communications Commission’s (“FCC”) apparent plans to prohibit paid prioritization and to reclassify broadband under Title II of the Communications Act. In its competition advocacy, the Federal Trade Commission (“FTC”) promotes consumer welfare by analyzing policies and offering alternatives to state and federal governmental agencies. Currently, the FCC is considering a new Open Internet Order that would have considerable negative effects on consumers…”

I.        Introduction

Writing on behalf of the International Center for Law & Economics (ICLE), we thank the Federal Communications Commission (“FCC” or “the Commission”) for the opportunity to respond 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.

The new NPRM emphasizes the principles of an “open internet,” but falls short of providing a concrete operational definition of what this entails.[1] The Commission’s vague and open-ended description of a “open internet” introduces enormous ambiguities that could grant the FCC unwarranted and expanded scope of discretion. In suggesting that openness equates to basic consumer access, without clear limitations or exceptions, the order leaves room for interpretation of what constitutes “open” access. This not only hampers stakeholders from understanding the boundaries of compliance, but also gives the FCC an opaque veil of authority that could be applied both expansively and inconsistently.

Some critics see the FCC’s pursuit of common-carrier regulation of broadband internet as an attempt to “control” an industry with vast economic and political significance.[2] That may be true. As we discuss in Section II, a more charitable criticism is that the Commission mistakenly believes that the provision of broadband internet is a natural monopoly that is best served by utility-style regulation. Alternatively, it could be argued that the FCC mistakenly believes that a dynamic and competitive industry marked by rapid innovation, improving quality, and falling prices can be effectively regulated as if it were a public utility. Under any of these rationales, Title II regulation is mistaken at best, and nefarious at worst.

Although much has changed since the 2015 Order,[3] nothing has happened that newly justifies the Commission reimposing Title II on broadband service. Perhaps recognizing the difficulty this poses, the Commission offers several new justifications for Title II regulation. In particular, “national security” is offered as a primary justification. In the 2015 Order, “net neutrality” was mentioned nearly 70 times. In contrast, the recent NPRM uses the term only a handful of times: once in the text and the others in only two footnotes. The 2015 Order mentioned “national security” only three times, while the NPRM uses the term more than five dozen times.

In addition, the FCC’s NPRM provides several other new justifications for sweeping regulation of broadband-internet access:

• COVID-19: “[T]he 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.”[4]
• Federal spending on provider investments and consumer subsidies: “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.”[5]
• The need for a uniform national regulatory system: “[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.”[6]

We caution the Commission to take care when relying on these justifications, for several reasons. First, the COVID-19 justification is at odds with the way history unfolded. U.S. broadband providers’ responses to the steep increase in demand during the pandemic was a demonstrable success of broadband competition (especially compared to how networks abroad fared).[7]

The Commission’s reliance on the passage of the Infrastructure Investment and Jobs Act (IIJA) is also a problematic justification for Title II regulation. The legislative process would have been a perfect time for Congress to legislate net neutrality or Title II regulation as it was debating the investment of tens of billions of dollars to encourage broadband buildout for the next decade or so. But no such provisions were included in the spending bills. If anything, this should indicate that the Commission should refrain from such an excessive regulatory intervention.

Even the Commission’s newly enacted digital-discrimination rules undermine the case for Title II regulation. Congress included a very terse statement that the Commission should look into impermissible discrimination in broadband deployment, but gave zero indication that it wanted Title II reclassification to serve as a remedy, even if such discrimination was found.[8] In short, if Congress intended to regulate broadband internet under Title II, it had numerous opportunities to do so in the recent past, but chose otherwise.

When it comes to national security, Congress has created a number of entities that have oversight powers.[9] But despite recent legislative investment in broadband deployment, Congress gave no indication that it wished the FCC to become a body driven by a national-security mission.  Thus, the Commission’s attempt to step into this arena appears both redundant and outside its core competencies. This further suggests that imposing net neutrality under the guise of such justifications might be unfounded, rather than grounded in a changed internet landscape or emergent security threats.

Aside from these overarching concerns advising against Title II regulation, the following comments seek to evaluate the FCC’s numerous beliefs and conclusions, as well as answer questions posed by the NPRM.

In Section II, we report that, by most measures, U.S. broadband competition is vibrant and has improved dramatically since the COVID-19 pandemic. We show that, 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 increased internet access and intermodal competition among providers.

In that section, we also conclude that a mere “incentive and ability” of providers to engage in practices that pose a threat to “internet openness” (however defined) is insufficient justification to impose outright bans on certain practices that have been demonstrated to enhance internet performance, foster investment, and improve consumer and edge provider well-being. Moreover, robust and increasing broadband competition would place a substantial check on the “incentive and ability” for provider attempts to engage in anticompetitive or harmful conduct.

Rather than promoting “openness,” Title II may serve to suppress it, as it would ban or regulate both existing practices or future innovative practices that simultaneously boost provider returns and improve internet users’ experience. As such, Section II argues that the heavy-handed regulation proposed by the NPRM is likely to both reduce investment returns and increase the uncertainty of those returns. This would thereby stifle future broadband investment, especially among small and rural providers.

As discussed in Section II.C.2, paid prioritization has been demonstrated to benefit consumers and edge providers and, in some, cases may be necessary to deliver some high-demand internet services. We also present evidence that throttling of application-service providers is virtually nonexistent and that consumers are largely indifferent to throttling policies as currently practiced. While the NPRM does not anticipate regulating data caps or usage-based pricing, we argue that there is a significant likelihood these practices could be scrutinized under the proposed “internet conduct” rules. Both practices have been shown to be especially beneficial to low-income or low-usage internet subscribers.

Section III describes how already-existing laws and agencies are well-equipped to deal with competition, consumer protection, and national-security issues. Many of the issues the FCC uses to justify extending its purview do not require Title II reclassification, or even action from the FCC itself.

Lastly, in Section IV, we demonstrate that the FCC’s proposed rules will certainly invite challenge under the “major questions doctrine,” which requires a clear grant of authority from Congress when an agency action exercises powers of vast economic and political significance. Moreover, based on recent Supreme Court precedent, there is a significant likelihood that the Commission’s proposed Title II regulation will be struck down by the courts. Reclassification of broadband as a Title II telecommunications service would clearly be an exercise of powers of “vast economic and political significance.” Broadband providers have invested billions of dollars per year into building out reliable high-speed networks throughout the country, serving hundreds of millions of consumers.[10] Nearly every U.S. resident, business, public agency, and other organization uses broadband internet over large portions of the day. Both federal and state governments have supported this continued buildout through subsidies to providers and consumers. As then-Judge Brett Kavanaugh put it when considering the 2015 Order, the “FCC’s net neutrality rule is a major rule for the purposes of The Supreme Court’s major rules doctrine. Indeed, I believe that proposition is indisputable.”[11] It is also clear the classification of broadband under the Communications Act is ambiguous, as every court to review the question has found it to be so.[12]

II.      Title II Is Inappropriate to Regulate Broadband

The Commission’s NPRM proposes regulating broadband as a Title II telecommunications service. But such regulations are unnecessary to protect the public and will harm investment, competition, and innovation. Part II.A details the absence of evidence that would justify reclassifying broadband as a common carrier under Title II. Part II.B shows how the current “light-touch” regulatory approach under Title I promotes innovation and competition. Part II.C presents evidence that Title II reclassification will reduce investment, and Part II.D explains how the NPRM’s proposed rules will reduce innovation by broadband providers.

A.      No Adequate Justification to Change Regulatory Classification of Broadband Providers

The NPRM argues that the Commission must restore Title II authority to “safeguard the open Internet” by “clear rules to prevent Internet service providers from engaging in practices harmful to consumers, competition, and public safety….”[13] But the NPRM’s arguments to support this assertion are weak, and the evidence is sparse.

Part II.A.1 argues that the alleged harms to openness are based on poor economic logic and lack any evidence demonstrating that broadband providers have reduced “openness” in the absence of Title II regulation. Part II.A.2 examines the logic of regulating broadband as a monopoly utility, and finds it wanting in light of competitive conditions in the market. Part II.A.3 furthers that argument by detailing the level of competition in the market for high-speed internet, noting the growth in the number of providers, the falling prices and increasing speeds made available, and the increased level of intermodal competition since repeal of the 2015 Order.

1.        NPRM has not sufficiently supported its assertion of a threat to openness

In the NPRM, the Commission notes that:

We believe that the rules we propose today will establish a baseline that the Commission can use to prevent and address conduct that harms consumers and competition when it occurs. Above, we express our belief that consumers perceive and use BIAS as an essential service, critical to accessing healthcare, education, work, commerce, and civic engagement. Because of its importance, we further believe it is paramount that consumers be able to use their BIAS connections without degradation due to blocking, throttling, paid prioritization, or other harmful conduct.^[14]

Relatedly, the Commission roots its proposed rules in the so-called “incentive and ability [of ISPs] to engage in practices that pose a threat to Internet openness.”^[15]

But the NPRM’s proposed rules, rooted in the presumption of ISPs’ “incentive and ability” to engage in practices that threaten internet openness, rest on a speculative foundation, rather than any substantive record of violations. Given the voluminous scale of internet traffic, the evidence of actual infractions is remarkably scant. This paucity of evidence undermines the rationale for preemptive, industrywide prohibitions, which would be based on hypothetical future harms. The mere possibility of ISPs engaging in deleterious conduct does not, in itself, warrant imposing onerous rules that could impede investment in innovative business models.

The assertion that ISPs have the incentive and ability to harm open internet access lacks convincing substantiation of demonstrable harmful conduct.[16] Speculative harm cannot justify regulations that could dissuade ISPs from exploring novel and potentially pro-consumer arrangements. Where there is evidence of consumer ignorance of the tradeoffs inherent in various product offerings, the solution may lie in enhanced disclosure—providing notice and choice to consumers—not in the imposition of broad restrictions.

Furthermore, the Commission fails to distinguish between instances where so-called “paid prioritization” has pro-consumer benefits and where it may constitute an anticompetitive harm. Many business relationships that might be labeled as paid prioritization—such as Netflix’s collocation of data centers within different networks to expedite service and reduce overall network load—are unequivocally pro-consumer. Such arrangements are better understood as sensible network optimization, rather than as anticompetitive behavior.

This narrow focus on ISPs as a potential vector of consumer harm also overlooks the broader ecosystem in which content aggregators like Netflix or Google exert significant influence over access to content. These platforms can, and often do, have a more immediate effect on consumer access than do ISPs. While edge providers sometimes come under fire themselves (wrongly, in our view), it is relevant to assessing the desirability of these proposed rules whether edge providers are made more or less powerful if ISPs are constrained, and what effect that would have on consumer welfare. Relatedly, many of the concerns over blocking, throttling, and paid prioritization are, in essence, expressing a concern that these edge providers will be unable to successfully bargain with ISPs. This, however, is a strange basis for such rules, as many of these firms are as large as or larger than any particular ISP. Moreover, the power these large firms exert in business relationships with ISPs establishes conditions that have downstream benefits for all edge providers.

Thus, the NPRM’s concern over the need for “neutral” connection lanes fails to recognize that neutrality may not be the sole (or even the best) path to fostering innovation. Startups could benefit from making agreements with ISPs to ensure optimized data transmission, which could be more achievable and less costly than the NPRM suggests. Moreover, the emergence of distributed cloud computing blurs the lines between established firms and newcomers, as they often share the same infrastructure and delivery networks, muting the Commission’s concerns.

Before moving forward, the Commission should diligently investigate the likelihood of future harms absent regulation, considering that no concrete evidence has surfaced since the last two rounds of rules on this matter—or even prior—of ISPs using their alleged incentive and ability to affect consumers and edge providers detrimentally. The FCC should substantiate actual harm rather than legislate against conjectural threats. Moreover, the FCC might find that transparency rules alone, or even the mere risk of public disclosure without formal regulation, could sufficiently deter quality degradation without the need for more intrusive regulations.

2.        Widespread use of high-speed internet does not render broadband internet a public utility

The Commission concludes 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.”[17] The Commission appears to argue 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 thus 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.[18] Water, sewer, electricity, and natural gas are typically considered “natural” monopolies under this definition.[19] 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.[20]

Over time, innovations have eroded the “natural” monopolies in telephone and cable.[21] In 2000, 94% of U.S. households had a landline telephone, and only 42% had a mobile phone.[22] By 2018, those numbers flipped.[23] In 2015, 73% of households subscribed to cable or satellite-television service.[24] Today, fewer than half of U.S. households subscribe.[25] Much of that transition is due to the enormous improvements in broadband speed, reliability, and affordability discussed in Part II.A.3.a. Similarly, entry and intermodal competition from 5G, fixed wireless, and satellite—as discussed in Part II.A.3.c—has meant that more than 94% of the country can now access high-speed broadband from three or more providers, thereby eroding the already tenuous claims that broadband-internet service is akin to a utility.

Regulating a competitive industry as a monopoly utility is what former Justice Stephen Breyer identified as a regulatory “mismatch,” which he defined as:

[A]n area where the rationale for regulation, judged by empirical fact, is not compelling, or where there are apparently less restrictive or more incentive-based forms of governmental intervention that can obtain regulation’s purported objective. [26]

As we note throughout these comments, the federal government already has in place many laws, rules, and policies that could satisfy many of the objectives the FCC seeks with Title II reclassification. In nearly every case, existing regulations are less-restrictive, more incentive-based, or less-capricious than common-carrier regulation under Title II.

3.        Existing broadband competition renders common-carrier regulations unnecessary

The FCC seeks comment on the state of competition in broadband internet-access services.[27] The NPRM claims that more than one-third of households lack competitive choice for fixed broadband at speeds of 100/20 Mbps, and that 70% of rural households lack such choice.[28] Despite the fact that nearly one-in-eight households with at-home internet are mobile-only, the Commission concludes that fixed and mobile internet are not substitutable.[29] Against this backdrop, the FCC seeks comment regarding whether services with substantially different technologies can substitute for each other competitively, and whether consumers nationwide have an adequate choice of providers.[30]

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—such as satellite and 5G—have expanded internet access and intermodal competition among providers.

a.        More households are served by two or more providers

Criticisms of the current state of broadband deployment tend to presume it results from widespread market failure. Specifically, the critics believe 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.[31] For example, in her speech announcing the FCC’s latest proposal to regulate internet services under Title II, Chair Jessica Rosenworcel claimed that 80% of the country faces a monopoly or duopoly for 100 Mbps or higher download speeds.[32] But, in fact, nearly all of the 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.

The Federal Communications Commission (FCC) defines high-speed broadband as Internet service that offers speeds of at least 25/3 Mbps.[33] 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.[34] A location is considered “underserved” if the only options available offer speeds of less than 100/20 Mbps.[35] The third iteration of the National Broadband Map, released in November 2023, indicates:[36]

• 8% of locations have access to connections of 25/3 Mbps or higher;
• 5% of locations have access to speeds of 200/25 Mbps or higher.
• Only 6.2% of locations are unserved, and 2.6% are “underserved” with connections of less than 100/20 Mbps.

The most recent FCC data on U.S. broadband deployment finds that 90% of the population in 2021 was served by one or more providers offering 250/25 Mbps or higher speeds (Table 1).[37] That is more than double the share of the population five years earlier, when only 44% of Americans had access to such speeds.[38] In 2019, the FCC did not report the share of population with access to 1,000/100 Mbps speeds or higher. In 2021, 28% of the population had access to these gigabit download speeds.

Table 1 shows that, in 2021, more than 85% of the population was covered by two or more fixed broadband providers offering 25/3 Mbps or higher speeds and more than 60% of the country was covered by three or more providers providing such speeds. If satellite and 5G providers are included, then close to 100% of the country is served by two or more high-speed providers.

Moreover, the evidence indicates that broadband competition has increased over time, as measured by the number of competing high-speed providers (Figure 1).[39]

• 25/3 Mbps: In 2018, 73.0% of households had access to 25/3 Mbps speeds from only one or two fixed broadband providers and only 21.6% had access from three or more providers. In 2021, only 29.1% of households had access from one or two providers while 69.3% were served by three or more providers. Thus, the number of households served by three or more providers increased by 47.7 percentage points from 2018 through 2021.
• 100/20 Mbps: In 2018, 11.6% of households had no access to 100/20 Mbps speeds and 14.8% had access from three or more fixed broadband providers. In 2021, 5.4% of households had no access, while 21.3% were served by three or more providers. Thus, the number of households served by three or more providers increased by 6.5 percentage points from 2018 through 2021.

Since the 2018 Order[40] that reclassified broadband under Title I, broadband competition has increased. The share of households with high-speed fixed broadband connections offered by three or more providers has increased. Over the same period, entry and intermodal competition from 5G, fixed wireless, and satellite, as discussed in more depth below, has meant that more than 94% of the country can now access high-speed broadband from three or more providers. The growing consumer adoption of technologies that differ substantially from fixed broadband demonstrate that consumers view these technologies as competitive substitutes for each other.

b.        Broadband speeds have increased while prices have declined

Critics of the current state of U.S. broadband competition claim that U.S. prices are among the highest in the developed world because the U.S. market is not as competitive as other jurisdictions. For example, the Community Tech Network asks rhetorically, “So why does the internet cost so much more in the U.S. than in other countries? One possible answer is the lack of competition.”[41] Their article includes a graphic in which U.S. internet is described as “expensive and slow” while Australia is categorized as “fast and cheap.”

None of these claims appear to hold up under scrutiny. Instead, adjusting for consumption and download speeds, U.S. fixed-broadband pricing is among the lowest in the developed world. On a cost-per-megabit basis, the United States is among the least costly (Figure 2).[42] In addition, Speedtest’s Global Index of median speeds reports the United States as having the second-fastest median speed among OECD countries (Figure 3).[43]

 

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. Deployment costs are driven largely by population density and terrain, as well as each country’s unique regulatory and tax policies.[44] 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.[45]

A broadband-pricing index published annually by USTelecom reports that inflation-adjusted broadband prices for the most popular speed tiers among consumers have decreased by 54.7% from 2015 to 2023, or 5.6% a year.[46] Prices for the highest-speed tiers have decreased by 55.8% over the same period. The Producer Price Index for residential internet-access services decreased by 11.2% from 2015 through July 2023.[47] The median fixed-broadband connection in the United States delivers more than 207 Mbps download service, an 80% increase over the pre-pandemic median speed (Figure 4).[48]

An industry experiencing increasing quality along with decreasing prices is consistent with an industry that faces robust, if not increasing, competition. By these measures, the U.S. broadband industry, under Title I regulation, is both competitive and dynamic. To date, proponents of Title II regulation have not demonstrated that net neutrality or other common-carrier obligations have or will improve internet speeds or pricing for consumers.

c.        New technologies have increased intermodal competition

Nearly one-in-eight households with at-home internet are mobile-only.[49] 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.[50] Even so, the Commission concludes that fixed and mobile internet are not substitutable,[51] and seeks comments regarding its conclusion that, “fixed broadband and mobile wireless broadband are not substitutes in all cases,” as well as its finding that broadband service and mobile-wireless service “enable[] different situational uses.”[52]

“All cases” is an unreasonably high threshold that fails to recognize the central question of competition—namely, how do or would consumers respond to a significant change in prices, quality, or terms and conditions? It’s been long-established that goods and services need not be perfect—or even close—substitutes to exert competitive pressure.[53] Indeed, as we discuss in this section, consumer adoption of 5G and satellite broadband indicate that many consumers view fixed, mobile, and satellite broadband as competitive substitutes. Thus, any FCC evaluation of broadband competition must account for competitive threats and pressures associated with intermodal competition.

One of the most important changes to occur since the last two net-neutrality rounds is the intensification of intermodal competition, primarily due to the introduction and expansion of satellite and fixed-wireless options, alongside the rapid growth of high-speed 5G technology. These developments have not only diversified the array of available services, but also enhanced their quality and accessibility. Moreover, the advent of widely available satellite and fixed-wireless technologies offers viable alternatives to traditional broadband, breaking down previous geographical and infrastructural barriers. Satellite-broadband services, 5G wireless, and fixed wireless now offer robust competition in areas previously served by, at most, one or two fixed-broadband providers. When considering the state of competition in broadband access, acknowledging this growing intermodal competition is crucial.

The advent of low-earth orbit (LEO) satellite broadband has dramatically expanded the geographic reach of high-speed internet access. Starlink satellite service has been made available to all locations in the United States.[54] Starlink’s reported speeds are between 25/5 Mbps and 220/25 Mbps.[55] Project Kuiper has successfully launched its first test satellites,[56] with commercial service expected to begin in the second half of 2024.[57] Starlink and Project Kuiper provide new broadband options, especially for rural and remote households previously limited to slow DSL services. S&P Global Market Intelligence reports:

Satellite broadband subs … have lingered in the 1 million to 2 million subscriber range since 2008 but finally broke above 2 million last year due largely to growth at Low Earth Orbit new entrant Starlink.” [58]

Research published in 2017—two years before the first launch of Starlink satellites—found that households in manufactured or modular homes are more likely to adopt satellite internet instead of wired, cable connections.[59] One explanation is that many manufactured homes are not cable-ready and lack the wiring for cable-internet connections. Thus, despite the higher monthly costs, the “all-in” cost of satellite connections is relatively lower. These consumers clearly considered cable and satellite to be competitors. In research published last month, Gregory Rosston and Scott Wallsten highlighted the importance of satellite broadband for competition in rural areas:

Starlink (and its likely future LEO competitors) are creating real, facilities-based broadband competition in areas that are currently not served by low-latency service or are served only by companies that rely on heavy subsidies. The opportunities, therefore are broadband competition in rural areas and large reductions in taxpayer spending on broadband availability.[60]

Citing estimates from research firm Omdia, the Wall Street Journal reports that about 43% of U.S. consumers had 5G mobile subscriptions as of June 2023.[61] The increasing deployment of 5G wireless technology has led to faster speeds, lower latency, and greater reliability, leading to 5G becoming increasingly competitive with fixed broadband.

• Recent data reports 5G download speeds of 80.0 Mbps to 195.5 Mbps among the three largest U.S. providers.[62] These speeds are sufficient to support a household of two to five users, streaming high-resolution and 4K video, streaming music, online gaming, remote work, and home-security services.[63] Moreover, these speeds far exceed the FCC’s definition of “high-speed broadband” as speeds of at least 25/3 Mbps.[64]
• Analysis of Speedtest data by Ericsson finds “the vast majority” of speed tests have measured a latency of less than 50 ms for both 4G and 5G.[65] In comparison, the FCC reports cable latencies of between 13 ms and 26 ms and fiber latencies of between 9 ms and 13 ms.[66]

As the 5G rollout continues and more spectrum is deployed, wireless speeds will continue to increase.[67] And enhancements like 5G fixed-wireless access (FWA) enable carriers to compete directly with wired services. For example, one study concludes:

We find that at current prices, full FWA entry to a cable-only market, which constitutes approximately 30 percent of all cable modem subscribers in the United States, would convert 18 percent of cable-only households to FWA …. In cable/fiber markets, we find that full FWA entry would convert 2 percent of households from cable modem to FWA ….[68]

B.      Title I Enables Business-Model Experimentation and Differentiation

The NPRM assumes that net-neutrality rules assuring an “open Internet” are necessary to promote “edge innovation,” which creates consumer demand for high-speed internet and therefore “expanded investments in broadband infrastructure.”[69] But the NPRM essentially ignores the dynamic competition in broadband markets that leads to significant investment and innovation by broadband providers, as the market since the repeal 2015 Order shows. Part II.B.1 describes this dynamic competition in broadband markets. Part II.B.2 makes the case that Title I classification is what has allowed continued experimentation and innovation by broadband providers.

1.        Broadband markets are characterized by dynamic competition

Potential competition plays a pivotal role in dynamic technology markets. The threat that new technologies like LEO satellite and 5G fixed wireless could disrupt incumbents’ market share stimulates continued infrastructure investment and innovation. Even where substitution currently is incomplete, the looming threat of competitive disruption disciplines behavior.

To this point, as we have previously noted,[70] broadband-market competition should be understood as dynamic, not static. Related to the question of intermodal competition (which can often present imperfect substitutes) are market dynamics driven by potential competition:

In dynamic contexts, potential competitors can have much greater importance. What today appears merely to be a potential competitor can obliterate incumbents tomorrow in acts of Schumpeterian creative destruction. To exclude such a competitor from the boundaries of the market would clearly be a mistake.[71]

Where traditional competition analysis tends to gauge competitiveness using narrow, static indicia such as price levels and market share, a focus on “dynamic competition” may be more appropriate in technology-driven markets like broadband service. Dynamic markets are not typically composed of many competitors making marginal price adjustments to capture small slices of market share. Instead, such markets often experience sequential competition: firms vie to capture the entire market (or most of it), with would-be competitors and new entrants attempting to disrupt incumbents by introducing innovative new products or business models to supplant previous technologies.

An assumption that more concentration must mean less competition stems from a blackboard model of “perfect competition,” where innovation is merely a competitive dimension that emerges from a healthy market structure, rather than innovation driving the evolution of market structures. Rivalry is, of course, important, but no one seriously believes we live in a world of perfect competition characterized by atomistic firms competing to produce commodity goods and services. Yet this simplistic structuralist view of markets is frequently advanced in policy discussions.[72]

As Harold Demsetz famously observed, “the asserted relationship between market concentration and competition cannot be derived from existing theoretical considerations and that it is based largely on an incorrect understanding of the concept of competition or rivalry.”[73] In the case of natural monopolies, scale economies may make it more efficient for one firm to produce a good or service in a given market than it would be for two or more firms. Scale economies arise when high fixed costs are spread over a larger number of goods, allowing larger firms to enjoy lower per-unit costs of production. Due to economies of scale, markets like broadband, with high fixed costs, will tend to have fewer firms than markets with lower fixed costs. But Demsetz demonstrated that, even then, competition for the market itself can lead to an efficient result that prevents the typical welfare harms attributed to monopolies.[74]

The oft-neglected literature on dynamic capabilities and organizational strategy, by contrast, supports the supposition that innovation drives market structure.[75] For the last several decades, this literature has demonstrated that static price-effect-focused analysis is insufficient to understand dynamic markets. For dynamic markets, instead, it is performance that matters, with price as a secondary consideration and innovation as an important component of performance.^[76] So long as a market remains contestable, even if it’s highly concentrated, firms’ performance will determine the likelihood of new entrants. It is pressure from those potential new entrants that continues to drive market competitiveness.^[77]

Indeed, in highly dynamic economies, particularly those characterized by scale economies, there can be just as much reason to be concerned about too many competitors as by too few. Further, these dynamic markets tend to see a continual rebalancing between equilibrium and disruption:

With dynamic competition, new entrants and incumbents alike engage in new product and process development and other adjustments to change. Frequent new product introductions followed by rapid price declines are commonplace. Innovations stem from investment in R&D or from the improvement and combination of older technologies. Firms continuously introduce product innovations, and from time to time, dominant designs emerge. With innovation, the number of new entrants explodes, but once dominant designs emerge, implosions are likely, and markets become more concentrated. With dynamic competition, innovation and competition are tightly linked.[78]

Thus, in any given market at a given time, there is likely some optimal number of firms that maximizes social welfare.[79] That optimal number—which is sometimes just one and is never the maximum possible—is subject to change, as technological shocks affect the dominant paradigms controlling the market.[80] The optimal number of firms also varies with the strength of scale economies, such that consumers may benefit from an increase in concentration if economies of scale are strong enough.[81] Therefore, in dynamic markets characterized by high fixed costs and strong economies of scale, like broadband markets, the optimal number of firms is reached much more quickly than in, for instance, relatively more commodity-like markets.

Broadband has many of the attributes of a dynamic market, which tends to make static analyses of broadband competition fail to accurately appreciate competitive realities.[82] Broadband markets are driven by technological trends and can be disrupted by rapid modal shifts (e.g., from DSL to cable, or, looking forward, from cable to 5G wireless, satellite, and fixed wireless). Moreover, the infrastructure necessary to deliver broadband requires both long-term planning, as well as substantial sustained investment. Firms in broadband markets are driven not merely by potential entrants today, but by the necessity of intense and expensive planning for future shifts in technology and consumption preferences. Thus, firms operate with an eye toward future competitive pressures, not merely in response to winning market share in the present.

Contrary to some assumptions, the U.S. broadband market is characterized by a significant amount of entry (and exit). As Connolly & Prieger find:

The striking conclusion is that there is a tremendous amount of dynamic activity in the US broadband market. In the national market, the entry rate averages 14-19% annually, which is greater than the entry rates the economic literature has found for many other industries. The exit rate for broadband is also higher than for other industries, but not as high as the entry rate, so that net entry averages 3.1% annually. With narrower geographic or service type market definitions, the entry rates average from 24% to an astounding 49% per annum.[83]

Thus, broadband providers must balance the need to offer attractive pricing in response to immediate competitive pressures with a simultaneous need to make risky and costly investments in technological upgrades in order to compete with advanced technologies that may not be implemented for a decade or more.

Just as market share is a poor indicator of competition, basic accounting measures of profitability and investment often fail to demonstrate how risk/return expectations are realized in dynamic markets over the entire innovation lifecycle. A very large and very profitable ISP may have experienced prior negative returns on invested capital, a result of the need to assume risk and make enormous investments under conditions of uncertainty. The broadband market is constantly evolving as a result of historical and ongoing infrastructure investment, rapidly changing technology, the evolution of content and content-delivery technology, new regulations, and shifting usage patterns, among other factors. Facilities-based competition (e.g., among fiber, cable, mobile, and satellite) has ebbed and flowed depending on these various characteristics, but it has consistently produced higher-quality connectivity at lower quality-adjusted prices. An accurate assessment of competitiveness in broadband markets must take account of all these characteristics.

Further, it is well-known that process and product innovation does not arise solely from new entry; incumbent firms frequently are important sources of innovation, as well as increased market competitiveness.[84] Dynamic analysis does take entry seriously, but it is much more sensitive to potential entry as a constraint on incumbents than a structuralist view would permit. Thus, for example, an incumbent broadband provider that offers a 250 Mbps tier must consider the potential capabilities of an existing competitor that only offers 100 Mbps service; it must incorporate potential threats from that competitor in its decision matrix when evaluating whether to upgrade its network to 1 Gbps in order to retain its customer base. An incumbent’s dominant position can quickly erode thanks to imperfect in-market substitutes, as well as from out-of-market firms that may decide to enter in the future.[85]

2.        Title I classification promotes dynamic competition

The debate surrounding the optimal regulatory framework for broadband services often hinges on finding a balance that fosters innovation and consumer welfare without stifling competition. The broadband industry has thrived, for decades delivering lower prices and faster speeds under a Title I classification.^[86] History has demonstrated that a light-touch regulatory regime under Title I of the Communications Act is the most conducive environment to achieve these objectives.

One of the primary functions of a firm is to discover consumer needs, a process that frequently requires firms to “think outside the box.” To attract and retain customers, firms must experiment with offerings that introduce competition from unexpected quarters and keep competitive pressures in place through technological and business-model innovation.

Light-touch regulatory frameworks are inherently more compatible with this approach than are more onerous regimes, like Title II of the Communications Act. For example, in 2011, MetroPCS attempted to introduce a limited data plan offering subsidized, unlimited access to YouTube and other content providers, targeting price-sensitive consumers.^[87] This plan, though unconventional, was poised to help bridge the digital divide by making wireless data more accessible to a segment traditionally underserved by larger carriers. This type of business model is a non-neutral form of paid prioritization, but it would very likely have helped price-conscious consumers access more internet services. MetroPCS ultimately abandoned this plan, and such a plan would almost certainly run afoul of the proposed rules in this NPRM.^[88]

Since then, ISPs have experimented with other potentially non-neutral paid-prioritization approaches that nonetheless would yield enormous consumer surplus, such as AT&T’s Sponsored Data program^[89] and T-Mobile’s Binge On.^[90] Such business models provide more choices, potentially lower prices, and introduce competitive threats to other players in the market. Ex ante rules that presumptively ban this kind of experimentation foreclose the ability to discover if such models actually serve the interests of consumers in practice.

And the harms that flow from reduced innovation affect not just ISPs and their consumers, but all parts of the internet ecosystem. As Sidak and Teece have observed:

The lost benefits [of bans on paid prioritization] would affect both end users and suppliers of content and applications. Optional business-to-business transactions for QoS will enhance the efficiency of traffic flow over broadband networks, reducing congestion. That enhanced efficiency benefits both the end users receiving content or applications and the content providers whose content or applications are demanded. Superior QoS is a form of product differentiation, and it therefore increases welfare by increasing the production choices available to content and applications providers and the consumption choices available to end users. Finally, as in other two-sided platforms, optional business-to-business transactions for QoS will allow broadband network operators to reduce subscription prices for broadband end users, promoting broadband adoption by end users, which will increase the value of the platform for all users.^[91]

This follows from the nature of ISPs as platforms sitting at the center of a two-sided market. On one side are end users who pay the ISP for access to the internet; on the other are content providers who want access to the end users. A ban on paid prioritization assures that the ISP can monetize only one side of the market. Aside from putting upward pricing pressure on end consumers, this also has a detrimental effect on the overall value of the platform for users and content providers alike.

Prescriptive ex ante regulations under Title II amount to per se bans on certain conduct, without even inquiring whether such conduct is a net harm. Antitrust law, which is sensitive to exactly the sort of vertical harms that are the subject of concern in this NPRM,^[92] has developed rule-of-reason analysis to parse when challenged conduct is harmful to consumer welfare.^[93] That is, antitrust law does not assume that vertical restraints always harm consumers, but has learned that, in many cases, vertical restraints are a net benefit. But this analysis always occurs ex post, allowing companies to experiment with innovative business models like the many variations of paid prioritization.

C.      Title II Reclassification Introduces Regulatory Uncertainty

The Commission tentatively deems unsubstantiated the 2018 Order’s conclusions that ISP investment is closely tied to the Title II classification.[94] This is because the Commission now concludes that network-infrastructure owners make long-term, irreversible investments and that the adoption of orders reclassifying broadband internet-access services would be unlikely to change these investment decisions. In addition, because the Commission received conflicting viewpoints on the actual effect of Title II classification on investment, it concludes that no one can “quantify with any reasonable degree of accuracy how either a Title I or a Title II approach may affect future investment.”[95] Instead, the Commission tentatively concludes that changes in ISP investment following adoption of reclassification orders were more likely related to factors such as economic conditions, technology changes, and general business decisions, rather than to Title I or Title II classification.[96] The Commission seeks comments on these findings, beliefs, and conclusions.

Put simply, Title II reclassification will hinder investment. The see-sawing between Title I and Title II regulation over the years has already injected regulatory uncertainty into the broadband market. Reimposing Title II regulations will inject additional uncertainty.[97] This uncertainty is compounded by the FCC’s recent digital-discrimination rules. Title II combined with digital discrimination imposes a double whammy of ex ante regulation of some conduct, combined with ex post monitoring, scrutiny, and enforcement of vast array of other conduct.[98]

Firms’ investment decisions are often likened to a pipeline. But a more appropriate analogy would be an assembly line, where investment opportunities are investigated and evaluated. Opportunities with negative returns on investment are rejected and those with positive returns are further evaluated and ranked. Because firms have limited resources, some of the investments with positive returns are rejected. Once a firm decides to pursue an investment opportunity, the project is further evaluated throughout the deployment timeframe. Just as a product can be pulled from the assembly line for defects, investments can be pulled for economic or technical defects. Generally speaking, the further down the assembly line the project goes, the less likely it is to be pulled. Thus, an interruption at the end of the assembly line is likely to be less disruptive than an interruption at the beginning.

In this sense, the Commission is correct to conclude that Title II classification would have relatively less impact on investments that are near the end of their assembly line. But that observation misses the much bigger picture of investments at the beginning of the assembly line and potential investments that are still in the investigation and evaluation stage. For these projects, Title II classification can turn projects with positive expected returns into projects with negative expected returns. In addition, the regulatory uncertainty that is endemic to Title II regulation reduces firms’ confidence in the reliability of their return-on-investment projections. Because of the well-known and widely accepted risk-return tradeoff, firms facing increased uncertainty in investment returns will demand higher expected returns from the investments they pursue.[99]

Put simply, Title II classification may not have a significant effect on investments near completion, but could have a statistically and economically significant impact on future and early-stage investments. Recently published peer-reviewed research supports this conclusion.

Wolfgang Briglauer and his co-authors examine the impact of net-neutrality regulations on broadband-network investment, specifically fiber-optic networks in OECD countries.[100] Roslyn Layton and Mark Jamison describe Briglauer, et al.’s research as “the only empirical, non-anecdotal analysis of net neutrality and investment to date.”[101] Using panel data from 2000 through 2021, Briglauer and his co-authors find evidence that net-neutrality regulations have a significant negative impact on fiber-optic network investment by internet service providers. They employ several econometric techniques, including fixed effects and instrumental variables models, to establish evidence of a causal relationship between net-neutrality rules and reduced investment. The main finding is that the introduction of net-neutrality regulations leads to an estimated 22-25% decrease in new fiber-optic network investments by ISPs.

Briglauer et al. argue their statistical analysis provides evidence that strict net-neutrality rules tend to slow deployment of new high-speed broadband connections. They find the negative impact manifests with a delay, rather than immediately, likely due to rigidities and lags in broadband-deployment projects, thus pointing to a long-run effect. In addition, their fiber investment variable measures newly installed fiber connections, representing new broadband-infrastructure capacity. This is more indicative of long-run capital investment rather than short-run variations in spending.

Briglauer et al. control for other factors unrelated to net-neutrality regulations by including macroeconomic conditions relevant for investment decisions, such as long-term interest rates and a measure of investment freedom. They also control for deployment costs, measured by population density and wages. In addition, their statistical model includes measures of cable competition, mobile competition, telecommunications services prices, and the number of broadband subscriptions. In many cases, these control variables have a statistically significant relationship with fiber investment. Nevertheless, even controlling for these other factors, the authors found that net-neutrality regulations were associated with decreased fiber-optic network investments by ISPs.

The Commission concludes that “changes in ISP investment following the adoption of each Order were more likely the result of other factors unrelated to the classification of BIAS, such as broader economic conditions.”[102] In this framing, it seems the Commission is arguing that if something contributes “more” (however “more” is measured) to investment than Title II classification, then the Commission should conclude that classification has no effect. But this is the wrong framing. Using statistical analysis, the effect of net-neutrality regulations on investment can be estimated while controlling for these other variables. The fact that other variables also affect investment does not invalidate a finding that net-neutrality regulations have some statistically and economically significant negative relationship with investment.

D.     Title II Would Deter Future Innovation in Business Models

1.        Paid prioritization is an essential component of many online business models

The Commission proposes to ban paid or affiliated prioritization arrangements, concluding such arrangements harm consumers, competition, and innovation, as well as creating disincentives to promote broadband deployment.”[103] Chair Rosensworcel has characterized paid prioritization as creating “fast lanes that favor those who can pay for access.”[104] This framing invites the question that was raised years ago, “Do fast lanes mean there are, by definition, slow lanes?”[105] The answer is “no,” as explained by Vox:

An ISP’s bandwidth is not fixed at current levels: As MVPDs shift to all-digital infrastructures, they have significant capacity to dedicate a larger portion of their “pipes” to broadband, which can meaningfully increase bandwidth available to consumers from today’s levels.

Think of bandwidth as a highway: If an entirely new lane is added at the ISP’s expense, that does not harm anyone riding along on the preexisting highway. We struggle to understand why enabling an “extra” HOV lane is bad policy that requires government regulation.

One should not simply assume that the creation of fast lanes of dedicated bandwidth forces everyone else who chooses not to pay ISPs, or cannot pay ISPs, into slow lanes. While those lanes may be slower than the fast lanes, they were slower with or without the fast lanes.

And if bandwidth-heavy traffic that would have traveled over the open Internet (adding to congestion) is offloaded onto a separate fast lane that does not impair the preexisting pipe’s bandwidth capabilities, it should actually ease congestion on the existing lanes, rather than create slow lanes.[106]

Prioritization is a longstanding and widespread practice and, as discussed at length in The Verge regarding Netflix’s Open Connect technology, the internet can’t work without some form of it:

When Open Connect originally launched a decade ago, the service started working collaboratively with ISPs on deployment. Netflix provides ISPs with the servers for free, and Netflix has an internal reliability team that works with ISP resources to maintain the servers. The benefit to ISPs, according to both Netflix and Akamai, is fewer costs to ISPs by alleviating the need for them to have to fetch copies of content themselves.[107]

Indeed, the Verge piece makes clear that even paid prioritization can be an essential tool for edge providers. As we’ve previously noted, paid prioritization offers an economically efficient means to distribute the costs of network optimization.[108]

Axel Gautier and Robert Somogyi developed a model that includes both paid prioritization and zero rating and conclude:

Prioritization is the preferred option of both the ISP and consumers under severe congestion and high-value content, because the low price charged by the ISP to consumers is counterbalanced by large payments from the [content providers].[109]

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.

2. Throttling is an effective traffic-management tool

The Commission proposes to ban throttling lawful content, applications, services, and nonharmful devices.[110] While the Commission notes that throttling is “not outright blocking,” it also concludes such conduct “can have the same effects as outright blocking.”[111] The proposed ban would not ban throttling when it is “based on a choice clearly made by the end user,” such as a consumer’s choice of a plan in which a set amount of data is provided at one speed tier and any remaining data is provided at a lower tier.[112]

Internet bandwidth is a scarce and congestible resource subject to wild swings in consumer use. For example, Taylor Swift’s 2023 U.S. concerts have been associated with record-breaking levels of 5G data use on AT&T’s network.[113] Thus, allowing application-specific throttling gives companies incentives to streamline data demands. For mobile networks, excessive data usage impacts spectrum resources available to other customers. If networks cannot limit bandwidth-hungry apps during busy periods, then smartphone app developers lose incentives to tighten data usage. As internet-video traffic occupies about two-thirds of bandwidth, networks need some ability to manage congestion.[114] Outright throttling bans, rather than specific rules against anticompetitive discrimination, eliminate useful tools.

There is a dearth of empirical research regarding the throttling of application-service providers. In the only known published academic research, Daeho Lee and Junseok Hwang categorize application-service providers into four groups by bandwidth-usage attributes and latency sensitivity.[115] Using data from South Korea, they test the hypothesis that ISPs would be more likely to discriminate against content providers needing more bandwidth and more sensitive to latency. A regression of estimated technology-gap ratios on these variables, however, shows no significance, suggesting that ISPs do not discriminate against content providers based on bandwidth usage or latency. Using crowdsourced measurements across 2,735 ISPs in 183 countries and regions, Li et al. find that U.S. mobile providers seem to throttle content providers, but not to the extent in which consumers would likely notice.[116]

On the consumer side, recent research published in Telecommunications Policy finds no evidence that subscribers change their behavior in the face of throttled data rates.[117] Christoph Bauner and Augusto Espin analyze throughput levels measured for mobile ISPs in the United States with usage data to evaluate how sensitive users are to throttling. Using regression analysis of app usage on various measures of throttling, Bauner & Espin find no significant effect of data throughput on app usage. They argue that users may benefit from a modest degree of throttling when it aids network stability and reliability.[118] Bauner & Espin conclude their finding “seemingly weakens the … argument in favor of net neutrality rules.”[119]

In another consumer study, Hyun Ji Lee and Brian Whitacre found that low-income users were willing to pay for an extra GB of data each month, but were not willing to pay extra for a higher speed.[120] This is likely because, if a subscriber has a higher data limit, then they have a lower chance of being throttled for exceeding the cap. Lee & Whitacre’s results indicate Lifeline consumers are willing to pay for the option to use more unthrottled data, but are not willing to pay for higher speeds at all levels of data usage. 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.

If, in fact, ISPs do not generally engage in throttling application-service providers and, when throttling does happen, consumers do not significantly change their usage in the face of throttling, then a ban on throttling is a solution in search of problem. In fact, it could be a solution that is worse than any perceived problem. A ban on data throttling removes essential network-management tools that could prevent congestion and improve overall customer experience. Moreover, discrimination against specific applications or competing services can already be scrutinized under existing antitrust and consumer-protection laws, as discussed in Part III.

3. Data caps and usage-based pricing can benefit both consumers and providers

In addition to the Commission’s proposed rules prohibiting throttling, the agency is also investigating data caps and usage-based pricing (UBP).[121] A 2021 survey reports that, during the pandemic, 37% of those surveyed hit their data cap, and 68% of those who exceeded their data-cap limit paid overage fees.[122]

Data caps and UBP are not a new issue. In 2013, an FCC advisory committee issued a report on data caps and UBP.[123] That report identified several ways in which the policies improve network performance, consumer experience, and investment and innovation among ISPs and edge providers:

• Data caps allow ISPs to employ various forms of price discrimination to recover the substantial fixed costs of building broadband networks. Without the ability to charge heavier users more through caps or usage-based pricing, ISPs lose flexibility in designing business models that align costs and willingness-to-pay. This could hamper their incentives and financial ability to continue investing in next-generation network upgrades.
• The ability to implement data caps or UBP provides incentive for internet application and edge service providers to develop more efficient ways of delivering data-intensive services. For example, data caps may “encourage edge providers to innovate more efficient means of delivering their services” by optimizing video compression algorithms and streamlining data transfers. Removing the possibility of caps or UBP eliminates a motivation for driving such innovation on the edge provider side.
• Prohibiting data caps or UBP would restrict future business-model experimentation between ISPs and consumers in response to evolving internet-usage patterns and demands. As technology enables new bandwidth-hungry apps and consumer behavior shifts, a strict ban on caps limits the pricing and service optionsthat ISPs can explore to sustainably meet that demand.[124]

While the NPRM is silent on data caps and UBP, the 2015 Order noted that data caps “may benefit consumers by offering them more choices over a greater range of service options,” but left open the possibility of future regulation:[125]

The record also reflects differing views over some broadband providers’ practices with respect to usage allowances (also called “data caps”). … Usage allowances may benefit consumers by offering them more choices over a greater range of service options, and, for mobile broadband networks, such plans are the industry norm today, in part reflecting the different capacity issues on mobile networks. Conversely, some commenters have expressed concern that such practices can potentially be used by broadband providers to disadvantage competing over-the-top providers. Given the unresolved debate concerning the benefits and drawbacks of data allowances and usage-based pricing plans, we decline to make blanket findings about these practices and will address concerns under the no-unreasonable interference/disadvantage on a case-by-case basis.[126]

Gus Hurwitz points out that data caps are a way of offering lower-priced services to lower-need users.[127] They are also a way of apportioning the cost of those networks in proportion to the intensity of a given user’s usage. He notes that, if all users faced the same prices regardless of their usage, there would be no marginal cost to incremental usage. Thus, users and content providers would have little incentive to consider their bandwidth usage. Network congestion does not go away by lifting data caps. Instead, it may be worsened, especially if there is no additional cost associated with additional usage.

As we note above, Lee & 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.[128] This indicates that even Lifeline subscribers have a positive willingness-to-pay for a greater data allowance.

Regardless of the effects of prohibiting data caps or UBP on consumers and providers, the more pernicious risk is the legal uncertainty of these practices under Title II regulation. Although the NPRM does not identify any specific proposals regarding data caps or UBP, there is a strong likelihood that these practices could be scrutinized or regulated under the overly broad proposed “conduct rules.” For example, Scott Jordan provides a thorough review of possible data-cap practices and which ones might fall afoul of the 2015 Order.[129] He concludes:

• Heavy-users caps on mobile-broadband service would likely satisfy the Order’s rules;
• Profit-maximizing caps on mobile-broadband service may or may not satisfy the rules; and
• Caps on fixed-broadband service are unlikely to satisfy the rules.

Jordan’s comprehensive survey demonstrates that many data-cap practices are in a gray zone of uncertainty regarding whether they would or would not satisfy the FCC’s conduct rules. This uncertainty would, by itself, likely stifle experimentation with innovative business models and practices, thereby hindering investment and diminishing users’ experiences.

III.    Existing Policies Protect Consumers, National Security, and Public Safety

The Commission seeks comments on whether consumer-protection and antitrust laws provide sufficient protections against blocking, throttling, paid prioritization, and “other conduct that harms the open Internet.][130] In this section, we note that the United States has a multiplicity of agencies, laws, regulations, and rules that span competition, consumer-protection, and national-security issues. The Commission has provided little to no evidence that the existing regulatory regime has been deficient in enforcing existing policies or that new policies are needed—particularly outside of a congressional mandate.

A.      Antitrust and Consumer Protection

Fundamental to the Commission’s position in the 2018 Order was the reasonable conclusion that ensuring ISPs do not interfere with consumers’ access to content over the internet would best be effected by adopting a competition and consumer-protection oriented approach. This is consistent with the Commission’s historical, deregulatory approach to information services, including in the 2015 Order. Since 2018, nothing has changed to disturb the soundness of this approach.

Core to the distinction in these approaches is an evaluation of the appropriate way to judge risk.  The 2015 Order was premised on the theory that because ISPs have any incentive and ability to engage in problematic conduct, they thus will very likely engage in that conduct.[131]  The Commission used this assumption to justify strong ex ante regulation to curtail such expected conduct. In the 2018 Order, rather than simply presuming harm, the Commission undertook an extensive, thorough, and fact-based analysis to first assess the likely risk of harm.[132] Based on this analysis, the Commission concluded that the risk of harmful conduct was low, in terms of both the likelihood that ISPs will engage in such conduct and its potential adverse effects on consumers. Because this risk is low, the Commission reasonably determined that a “light touch” ex post competition-oriented regulatory approach was preferable to the ex ante prescriptive rules adopted in the 2015 Order and under consideration in this NPRM.

We believe that the Commission had the better analysis in 2018 and should continue to support this approach. Indeed, in the long history of the net-neutrality debates, the justifications for imposing Title II obligations on ISPs have been rooted in the precautionary principle, with little or no actual evidence produced demonstrating any intentional violation of “neutrality” principles. And since 2018, no other evidence has been produced.

The ideal regulatory framework for dealing with potential violations of neutrality principles is an ex post regulatory approach that reflects well-established competition law principles and is commensurate with the actual degree of risk and extent of harm associated with ISP misconduct, while also mitigating against the risk that over-regulation that would harm consumers by curtailing pro-competitive ISP activity.

As the Commission observed in the 2018 Order, “[t]he Communications Act includes an antitrust savings clause, so the antitrust laws apply with equal vigor to entities regulated by the Commission.”[133] Thus, the Commission has already struck the proper balance between indirect antitrust enforcement and direct regulation under the Communications Act, which incorporates competition policy as the generally applicable regulatory “default” in the absence of specific statutory mandates. As Justice Breyer has observed, “[r]egulation is viewed as a substitute for competition, to be used only as a weapon of last resort—as a heroic cure reserved for a serious disease.”[134]

Of course, the Communications Act does not speak directly to “net neutrality” harms. But to the extent the act permits the Commission to regulate in this area, it does so largely by requiring the agency to choose between Title I and Title II classifications, reserving Title II for circumstances where the Commission determines that the risk of harm from providers is sufficiently great that ex ante, prescriptive regulation is appropriate—“as a heroic cure reserved for a serious disease.”[135]

Moreover, the Commission’s prior efforts to promote net neutrality overlap substantially, if not entirely, with concerns over ISPs engaging in anticompetitive conduct. In the 2018 Order, the Commission specifically noted that this was a necessary logical justification for its previous order, observing that: “The premise of Title II and other public utility regulation is that ISPs can exercise market power sufficient to substantially distort economic efficiency and harm end users.”[136]

In the 2015 Order, the Commission acknowledged that “[c]ommitment to robust competition and open networks defined Commission policy at the outset of the digital revolution,”[137] and that “[t]he principles of open access, competition, and consumer choice embodied in Carterfone and the Computer Inquires have continued to guide Commission policy in the Internet era[.]”[138]  Likewise, the Commission explicitly acknowledged in the 2015 Order that its asserted authority under Section 706 was based, at least in part, on a mandate to promote competition.[139] Most tellingly, in a section titled “Competitive Effects,” the Commission noted that:

As the Commission has found previously, broadband providers have incentives to interfere with and disadvantage the operation of third-party Internet-based services that compete with the providers’ own services. Practices that have anti-competitive effects in the market for applications, services, content, or devices would likely unreasonably interfere with or unreasonably disadvantage edge providers’ ability to reach consumers in ways that would have a dampening effect on innovation, interrupting the virtuous cycle.  As such, these anticompetitive practices are likely to harm consumers’ and edge providers’ ability to use broadband Internet access service to reach one another . . . .[140]

Thus, as the Commission itself acknowledged in the 2015 Order, competition—and, by implication, anticompetitive behavior of ISPs—is one of the core concerns that drove development of internet policy. Indeed, in the present NPRM, much of the feared harms mentioned are largely derived from vertical foreclosure theory. Namely, they stem from the classic antitrust concern that dominant firms in a vertical supply chain may foreclose competitors from access to consumers, or extract supracompetitive prices from input providers.[141] For example, the NPRM declares that:

[W]e also propose to reinstate rules that prohibit ISPs from blocking or throttling the information transmitted over their networks or engaging in paid or affiliated prioritization arrangements. Additionally, we propose to reinstate a general conduct standard that would prohibit practices that cause unreasonable interference or unreasonable disadvantage to consumers or edge providers.[142]

These instances of potential ISP misconduct raise straightforward antitrust concerns with vertical conduct, squarely within the purview of antitrust law.[143] Importantly, antitrust enforcers and courts—following antitrust economists—assess these vertical restraints under the rule of reason, avoiding their presumptive condemnation because they only rarely result in actual anticompetitive harm.[144]

Under this 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.

In fact, only a few types of conduct are presumptively condemned, and then only when experience has demonstrated that they are more-often-than-not harmful.[145] Vertical restraints are never evaluated under this per se standard.[146] With such a competition framework for assessing conduct that might threaten “Internet openness,” the Commission would be well-positioned to detect and remedy harmful conduct.

B.      The Transparency Rule Is Adequate for Consumer Protection

One of the longstanding policies available to protect consumers is the Commission’s transparency rule. The existing transparency rule, as upheld by the D.C. Circuit in Verizon v. FCC, mandates that broadband internet-access service providers disclose network-management practices, performance, and commercial terms.[147] This rule, applicable to both fixed and mobile providers, is integral for enabling consumers and edge providers to make informed choices. This rule has, in one form or another, been operational since 2010, and has served as a valuable consumer-protection measure.

The Commission is, however, considering extending this rule in a number of ways. It’s important to keep in mind that no policy extended indefinitely presents an unalloyed good: even transparency requirements, taken too far, can bring more costs than benefits.[148] For example, the proposed enhancements include more tailored disclosures to various stakeholders—including consumers, edge providers, and the FCC[149]—that, despite best intentions, may impose significant costs in the form of compliance burdens on ISPs, while doing little if anything to inform consumers meaningfully.

Additionally, a rule change that leads to the publication of information like pricing will functionally resemble a de facto tariff system. Tariffing, however, is a core component of common carriage.[150] Thus, if the Commission opts not to reclassify under Title II, imposition of such a de facto tariff could be a violation of Section 706. Moreover, regulatory pressure to report pricing in uniform ways could lead to uniform pricing, which, though benign-sounding, could lead to downstream changes in service level and pricing that do not ultimately increase consumer welfare.

For example, although at times difficult to follow, internet-service pricing that is designed around discounts and incentives could be used to benefit economically vulnerable consumers and attract or retain them through a form of price discrimination. If, however, rates converge on a uniform schedule, it is possible that these forms of discounts and incentives will disappear, and that pricing will reflect a mean that is more difficult for lower-income consumers. This possibility has increased substantially with the FCC’s recently adopted digital-discrimination rules, which explicitly subject pricing, discounts, incentives and other terms and conditions to scrutiny and enforcement under the rules.[151] Thus, even in the absence of Title II regulation, the proposed reporting requirements can work hand-in-hand with the digital-discrimination rules to regulate rates in the direction of uniform pricing across providers, thereby limiting the scope of competition for broadband services.

Further, the utility of certain disclosures, such as those related to network congestion, is also questionable. The Commission opted to forego requiring disclosures related to network performance in the 2015 Order.[152]  The Commission should continue in this manner, as such requirements are even less useful today than they were in 2015. With the availability of speed-test applications, consumers already possess tools to assess the performance of their ISP, casting doubt on the additional value of mandatory congestion disclosures.

IV.    Title II Reclassification Will Present Significant Legal Challenges for the Commission

In the NPRM, the FCC asks whether and how the major questions doctrine (MQD) should inform its conclusions on the text and structure of the Communications Act.[153] With the FCC yet again seeking to reclassify broadband, it is worth noting that, since courts have consistently found the Communications Act is ambiguous as to the proper classification of broadband, there are reasons to doubt whether courts would allow this Title II reclassification as compatible with the MQD.

The MQD, as developed by the Supreme Court, stands for the proposition that agencies will not receive deference while interpreting ambiguous statutory language of “vast economic and political significance.”[154] The MQD requires that Congress give an agency clear congressional authorization to act in such cases. In other words, an ambiguous grant of authority is not enough.

In three recent cases, the Supreme Court has struck down major agency actions due to reliance on ambiguous statutory provisions.

In Ala. Ass’n of Realtors v. Dep’t of Health & Human Servs.,[155] the Court rejected the Centers for Disease Control and Prevention’s (CDC) attempt to impose a moratorium upon residential evictions due to COVID-19. The Court emphasized that “[e]ven if the text were ambiguous, the sheer scope of the CDC’s claimed authority… would counsel against the Government’s interpretation.”[156] Instead, the Court required “Congress to speak clearly when authorizing an agency to exercise powers of ‘vast economic and political significance.’”[157] The Court was concerned that the government’s reading of the statute would give them “a breathtaking amount of authority” with virtually “no limit… beyond the requirement that CDC deem a measure ‘necessary.’”[158]

In NFIB v. Dep’t of Labor,[159] the Court found the Occupational Safety and Health Administration (OSHA) could not pass a vaccine mandate for workplaces. Quoting Realtors, the Court noted that Congress must “speak clearly when authorizing and agency to exercise powers of vast economic and political significance.”[160] Since the vaccine mandate was “a significant encroachment into the lives—and health—of a vast number of employees,” it had vast economic and political significance.[161] Therefore, since the statute did not “plainly authorize[] the Secretary’s mandate,” OSHA’s rule was unlawful.[162] The Court found the MQD was important, because it limited agencies’ ability to “exploit some gap, ambiguity, or doubtful expression in Congress’s statutes to assume responsibilities far beyond its initial assignment.”[163]

In West Virginia v. EPA,[164] the Court considered a rulemaking by the Environmental Protection Agency (EPA) on emission limits for power plants. After reviewing the caselaw back to Brown & Williamson through Gonzalez, UARG, Burwell, Realtors, and NFIB,[165] the Court concluded that there was an “identifiable body of law that has developed over a series of significant cases all addressing a particular and recurring problem: agencies asserting highly consequential power beyond what Congress could reasonably be understood to have granted.”[166] The Court found it was clearly a major question, because the EPA had changed a longstanding practice in how it operated under the statute by expanding its power to “unprecedented” levels through a little-used statutory grant of authority.[167] This is despite the fact the agency had asked Congress for increased authority to do exactly what it decided to do under this provision.[168] Since there was no “clear Congressional authorization” for such a rule, the Court struck it down under the MQD.[169]

In sum, the MQD is now recognized by the Supreme Court as an important limit on agency action. If the statutory authority relied upon by the agency is ambiguous and the agency action is of vast economic and political significance, then courts will find the agency action unlawful on grounds that it exceeds the authority granted by Congress. As the Court put it in NFIB:

Why does the major questions doctrine matter? It ensures that the national government’s power to make the laws that govern us remains where Article I of the Constitution says it belongs—with the people’s elected representatives. If administrative agencies seek to regulate the daily lives and liberties of millions of Americans, the doctrine says, they must at least be able to trace that power to a clear grant of authority from Congress.[170]

Here, reclassification of broadband as a Title II telecommunications service would clearly be an exercise of powers of vast economic and political significance. Broadband providers have invested billions of dollars annually into building out reliable high-speed networks throughout the country, serving hundreds of millions of consumers.[171] On top of that, both federal and state governments have supported this continued buildout through subsidies.[172] The NPRM, which closely mirrors the rules from the 2015 Order, would further affect the expected returns on investment from both broadband providers and policymakers.[173] As then-Judge Brett Kavanaugh put it when considering the 2015 OIO, the “FCC’s net neutrality rule is a major rule for the purposes of The Supreme Court’s major rules doctrine. Indeed, I believe that proposition is indisputable.”[174]

It is worth noting that, much like the agency actions in Realtor and NFIB, the scope of authority claimed by the FCC through reclassification is staggering, allowing the Commission to regulate nearly the entire internet infrastructure through Title II’s expansive regulatory provisions. And as in West Virginia, Congress has considered and rejected net-neutrality legislation that would give the FCC clear authority to impose such rules.

Moreover, the NPRM’s attempt, much like the 2015 Order, to nominally minimize the reach of its claimed authority under Title II through forbearance amounts to rewriting the act to make it more palatable, including by forbearing from rate regulation or network-unbundling requirements. [175]  This is very similar to the attempted “tailoring” by the EPA that the Court rejected in Utility Air Regulatory Group v. EPA.[176]  There, the Tailoring Rule was an attempt to make it such that small entities with the potential to emit greenhouse gasses would not be subject to lawsuits that the act would allow.[177] The Court rejected this attempt to rewrite the statute, concluding that an agency “has no power to ‘tailor’ legislation to bureaucratic policy goals by rewriting unambiguous statutory terms.”[178] Much like the EPA in UARG, the FCC’s “need to rewrite clear provisions of the statute should have alerted” them “that it had taken a wrong interpretive turn.”[179]

Moreover, the ability to forbear under Title II also gives the FCC the ability to stop forbearing once Title II reclassification is made. Thus, the decision to reclassify will have huge economic and political implications, as the public and those regulated will have to pay special attention to the forbearance and possible un-forbearance of the FCC’s decisions going forward.

The concurrence from D.C. Circuit Court of Appeals Judges Sri Srinivasan and David Tatel in US Telecom did not dispute that the rule had vast economic and political significance. The concurrence instead focused on the implications of the Supreme Court’s opinion in National Cable and Telecommn’cs Ass’n v. Brand X Internet Serv., 545 US. 967 (2005).[180] The concurrence concluded essentially that Brand X settled the question by finding the FCC had the authority to make the classification decision.[181]

The problem with this, however, is that the Brand X decision just found that the Communications Act is ambiguous as to whether broadband is a “telecommunications service.”[182] In Brand X, the late Justice Antonin Scalia made the argument in his dissent that the Communications Act defined telecommunications service in a way that unambiguously applied to cable-modem service.[183] If this was the Court’s opinion, then there would be a strong argument that it is settled law that Congress spoke clearly to the issue. But it wasn’t. The majority rejected Justice Scalia’s arguments and found the definition ambiguous. In other words, Brand X did not foreclose a challenge under the MQD.

On the contrary, Brand X, as well as the D.C. Circuit’s decision upholding the 2015 Order[184] and the 2018 Order,[185] all stand for the proposition that the classification of broadband service under the Communications Act is ambiguous. Here, this means that the second part of the MQD, whether Congress clearly spoke to the issue, is a clear no.

To sum up, 1) the MQD is now clearly recognized doctrine by the Supreme Court; 2) the decision to apply Title II to broadband services is a decision of “vast economic and political significance”; and 3) Brand X (and its progeny) stands for the proposition that Congress has not unambiguously spoken to whether broadband service is a telecommunications service under the Communications Act. Therefore, the decision to reclassify broadband service again will likely fail under the MQD.

[1] Notice of Proposed Rulemaking, Safeguarding and Securing the Open Internet, WC Docket No. 23-320 (Sep. 28, 2023) [hereinafter “NPRM”] at ¶ 1.

[2] Brendan Carr, Dissenting Statement of Commissioner Brendan Carr, Safeguarding and Securing the Open Internet, WC Docket No. 23-320, Notice of Proposed Rulemaking (Oct. 19, 2023), available at https://docs.fcc.gov/public/attachments/FCC-23-83A3.pdf (“In other words, utility-style regulation of the Internet was never about improving your online experience—that was just the sheep’s clothing. It was always about government control.”).

[3] 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”].

[4] Id.

[5] Id.

[6] Id. at ¶ 3.

[7] See, e.g., Anna-Maria Kovacs, U.S. Broadband Networks Rise to the Challenge of Surging Traffic During the Pandemic, Georgetown University (Jun. 2020), https://georgetown.app.box.com/s/8e76udzd1ic0pyg42fqsc96r1yzkz1jf. See also European Commission, Digital Solutions During the Pandemic (Sep. 2023), https://commission.europa.eu/strategy-and-policy/coronavirus-response/digital-solutions-during-pandemic_en (“To prevent network congestion and to support the enjoyment of digital services, the?European Commission called upon?telecom operators and users to take action and met with the CEOs of the streaming platforms. The streaming platforms were encouraged to offer standard rather than high-definition content, telecom operators were recommended to adopt mitigating measures for continued traffic, and users were advised to apply settings to reduce data consumption, including the use of Wi-Fi.”)

[8] See Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, § 60506 (2021) (Digital Discrimination) [hereinafter “IIJA”].

[9] See Brendan Carr, supra, note 2 (“Congress has already empowered Executive Branch agencies with national security expertise, including the DOJ, DHS, and Treasury, with the lead when it comes to security issues in the communications sector.”)

[10] See, e.g., 2022 Broadband Capex Report, USTelecom (Sep. 8, 2023), https://ustelecom.org/research/2022-broadband-capex (“America’s broadband industry invested a record $102.4 billion in U.S. communications infrastructure in 2022, reflecting broadband providers’ determination to help achieve the national objective of affordable, reliable high-speed connectivity for all. The annual figure represents a 21-year high for investment from the communications sector and a 19% year-over-year increase.”).

[11] US Telecom v. FCC, 855 F.3d 381, 422 (D.C. Cir. 2016) (Kavanaugh, J., dissenting from denial of rehearing en banc).

[12] Cf. National Cable and Telecommn’cs Ass’n v. Brand X Internet Serv., 545 US. 967 (2005); US Telecom v. FCC, 825 F.3d 674 (D.C. Cir. 2016).; Mozilla Corp v. FCC, 940 F.3d 1 (D.C. Cir. 2019).

[13] NPRM at ¶ 3.

[14] Id. at ¶ 116.

[15] Id. at ¶ 122.

[16] See, for example, Bauner & Espin, infra note 116 (regarding throttling, concluding “incentives for such discrimination are not as strong as feared.”)

[17] NPRM at ¶ 17.

[18] 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.”)

[19] 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.”)

[20] 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.”)

[21] See id. at 59-73.

[22] 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.

[23] Id. (showing household usage of landlines and mobile phones in 2018 at 42.7% and 95%, respectively).

[24] 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.

[25] 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.

[26] See Stephen Breyer, Regulation and Its Reform 195 (1982).

[27] NPRM at ¶ 127.

[28] Id.

[29] Id.

[30] Id.

[31] 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.”).

[32] 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.”).

[33] 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 November 2023, FCC Chair Rosenworcel announced a notice of inquiry seeking input on a proposal to raise the minimum connection-speed benchmark to 100/20 Mbps, with a goal of having a benchmark of 1000/500 Mbps by the year 2030; See also, 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.

[34] See IIJA at § 60102 (a)(1)(A). See also 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.

[35] See IIJA at § 60102(a)(1)(C)(II)(i).

[36] 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.

[37] 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.

[38] FCC, 2019 Broadband Deployment Report, GN Docket No. 18-238, FCC 19-44 (May 29, 2019), at Fig, 4, available at https://docs.fcc.gov/public/attachments/FCC-19-44A1.pdf.

[39] FCC, 2022 Communications Marketplace Report, GN Docket No. 22-203 (Dec. 30, 2022), at Fig. II.A.28, https://docs.fcc.gov/public/attachments/FCC-22-103A1.pdf.

[40] 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”]

[41] 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.

[42] This is qualitatively consistent with the FCC’s finding that United States has the seventh-lowest prices per-gigabit of data consumption. FCC, 2022 Communications Marketplace Report (Appendix G), GN Docket No. 22-103 (Dec. 30, 2022), at 69 (Fig. 41 Fixed Broadband Price Indexes), available at https://docs.fcc.gov/public/attachments/FCC-22-103A5.pdf.

[43] Speedtest, Median Country Speeds Oct. 2023, Speedtest Global Index (last accessed Dec. 11, 2023), https://www.speedtest.net/global-index.

[44] See 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; 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. (May 18, 2023), https://laweconcenter.org/resources/regulatory-myopia-and-the-fair-share-of-network-costs-learning-from-net-neutralitys-mistakes.

[45] Id.

[46] Arthur Menko, 2023 Broadband Pricing Index, Business Planning Inc., (Oct. 2023), available at https://ustelecom.org/wp-content/uploads/2023/10/USTelecom-2023-BPI-Report-final.pdf.

[47] 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.

[48] Speedtest, 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).

[49] 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).

[50] 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.

[51] Id. 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).

[52] NPRM at ¶123 (emphasis added).

[53] See Edward Chamberlin, The Theory of Monopolistic Competition (1933) (arguing that even if a competitor’s service is not a perfect substitute, it can still exert competitive pressure by appealing to different segments of the market with different preferences.). See also William J. Baumol, Contestable Markets: An Uprising in the Theory of Industry Structure, 72 Am. Econ. Rev. (1982) (arguing that even if a new entrant’s product is not a perfect substitute for the incumbent’s product, it can still exert competitive pressure by threatening to enter the market and erode the incumbent’s market share.)

[54] See Dan Heming, Starlink No Longer Has a Waitlist for Standard Service, and 10 MPH Speed Enforcement Update, Mobile Internet Resource Center (Oct. 3, 3023), https://www.rvmobileinternet.com/starlink-no-longer-has-a-waitlist-for-standard-service-and-10-mph-speed-enforcement-update.

[55] See Starlink Specifications, Starlink (last accessed Dec. 12, 2023), https://www.starlink.com/legal/documents/DOC-1400-28829-70.

[56] See Amazon Staff, 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.

[57] See 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.

[58] John Fletcher, The History of US Broadband, S&P Global Market Intelligence (May 23,2023), https://www.spglobal.com/marketintelligence/en/news-insights/research/the-history-of-us-broadband. The report also notes, “While fixed wireless similarly had trouble breaking above 2 million subscribers for years, its recent surge, driven by T-Mobile US Inc. and Verizon, helped it surpass 6 million last year.” Id.

[59] See Andre Boik, The Economics of Universal Service: An Analysis of Entry Subsidies for High Speed Broadband, 40 Info. Econ. & Pol’y 13 (2017).

[60] Gregory Rosston & Scott Wallsten, Should Satellite Broadband Be Included in Universal Service Subsidy Programs?, 6 J. L. & Innovation 135 (2023).

[61] See Drew FitzGerald, After More Than Four Years, Has 5G Lived Up to Expectations?, Wall St. J. (Oct. 14, 2023), https://www.wsj.com/business/telecom/how-5g-changed-world-752b13ee.

[62] See Robert Wyrzykowski, 5G Experience Report, OpenSignal (Jul. 2023), https://www.opensignal.com/reports/2023/07/usa/mobile-network-experience-5g; Petroc Taylor, Average 5G and Overall Download Speed by Provider in the United States in 2023 (in Mbps), Statista (Jul. 11, 2023), https://www.statista.com/statistics/818204/4g-3g-and-overall-download-speed-in-the-united-states-by-provider.

[63] See Robin Layton, Everything You Need to Know About Internet Speeds, AllConnect (Aug. 9, 2023), https://www.allconnect.com/blog/consumers-guide-to-internet-speed.

[64] 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 November 2023, FCC Chair Rosenworcel week announced a notice of inquiry seeking input on a proposal to raise the minimum connection-speed benchmark to 100/20 Mbps, with a goal of having a benchmark of 1000/500 Mbps 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.

[65] Reiner Ludwig, Who Cares About Latency in 5G?, Ericsson Blog (Aug. 16, 2022), https://www.ericsson.com/en/blog/2022/8/who-cares-about-latency-in-5g.

[66] FCC, Measuring Fixed Broadband—Eleventh Report (Dec. 31, 2021), https://www.fcc.gov/reports-research/reports/measuring-broadband-america/measuring-fixed-broadband-eleventh-report.

[67] See, Eli Blumenthal, Verizon’s 5G Speeds Are About to Get Faster, Ahead of Schedule, CNET (Aug. 14, 2023), https://www.cnet.com/tech/mobile/verizons-5g-speeds-are-about-to-get-faster-ahead-of-schedule.

[68] Hal Singer & Augustus Urschel, Competitive Effects of Fixed Wireless Access on Wireline Broadband Technologies, Econ One (Jun. 2023), available at https://api.ctia.org/wp-content/uploads/2023/06/Competitive-Effects-of-Fixed-Wireless-Access-on-Wireline-Broadband-Technologies-FINAL.pdf.

[69] NPRM at ¶129.

[70] This section is adapted from Geoffrey A. Manne, Kristian Stout & Ben Sperry, A Dynamic Analysis of Broadband Competition: What Concentration Numbers Fail to Capture, at 26-30, Int. Ctr. for L. & Econ. (Jun. 3, 2021), available at https://laweconcenter.org/wp-content/uploads/2021/06/A-Dynamic-Analysis-of-Broadband-Competition.pdf.

[71] See J. Gregory Sidak & David J. Teece, Dynamic Competition in Antitrust Law, 5 J. Competition L. & Econ. 581, 614 (2009).

[72] C.f. id. at 585 (“Indeed, it is common to find a debate about innovation policy among economists collapsing into a rather narrow discussion of the relative virtues of competition and monopoly, as if they were the main determinants of innovation. Clearly, much more is at work.”).

[73] Harold Demsetz, Why Regulate Utilities?, 11 J. L. & Econ. 55, 55 (1968).

[74] See id.

[75] See Sidak & Teece, Dynamic Competition, supra note 71.

[76] See, e.g., Thomas M. Jorde & David J. Teece, Competing Through Innovation: Implications for Market Definition, 64 Chi.-Kent L. Rev. 741, 742 (1988) (“Moreover, in markets characterized by rapid technological progress, competition often takes place on the basis of performance features and not price.”); David S. Evans & Richard Schmalensee, Some Economic Aspects of Antitrust Analysis in Dynamically Competitive Industries, in 2 Innovation Policy and The Economy 1, 3 (Adam B. Jaffe, et al., eds. 2002) (“The defining feature of new-economy industries is a competitive process dominated by efforts to create intellectual property through R&D, which often results in rapid and disruptive technological change.”).

[77] See generally William J. Baumol, John C. Panzar & Robert D. Willig, Contestable Markets and the Theory of Industry Structure (1982).

[78] Sidak & Teece, Dynamic Competition, supra note 71, at 585, 604.

[79] For a discussion of this principle and how it applies to broadband markets, see T. Randolph Beard, George S. Ford, Lawrence J. Spiwak, & Michael Stern, The Law and Economics of Municipal Broadband, 73 Fed. Comm’cns L.J. 1 (2020) [hereinafter, “Beard, Ford, Spiwak & Stern”].

[80] See Rabah Amir, Market Structure, Scale Economies and Industry Performance, CORE Discussion Paper No. 2003/65 (Sep. 1, 2003), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=995721.

[81] See Demsetz, Why Regulate Utilities?, supra note 73; see also Sharat Ganapati, Growing Oligopolies, Prices, Output, and Productivity, Census Working Paper CES-WP-18-48 (Jan. 20, 2020), available at https://www.sganapati.com/files/Ganapati_2019_OligopoliesPricesQuantities_AEJmicro.pdf (noting that increased concentration results from a beneficial growth in firm size in productive industries that “expand real output and hold down prices, raising consumer welfare, while maintaining or reducing their workforces, lowering labor’s share of output.”)

[82] See generally J. Gregory Sidak & David J. Teece, Innovation Spillovers and The “Dirt Road” Fallacy: The Intellectual Bankruptcy of Banning Optional Transactions for Enhanced Delivery Over the Internet, 6 J. Comp. L. Econ. 521, 540 (2010) (Discussing the broad array of factors that must be taken into account in a dynamic analysis of the Internet and broadband service).

[83] Michelle Connolly & James E. Prieger, A Basic Analysis of Entry and Exit in the US Broadband Market, 2005-2008, Pepperdine University School of Public Policy Working Paper No. 42 (2013) at 4, https://digitalcommons.pepperdine.edu/sppworkingpapers/42 (published as Michelle Connolly & James E. Prieger, A Basic Analysis of Entry and Exit in the US Broadband Market, 2005-2008, 12 Rev. Network Econ. 229 (2013)).

[84] See generally Nicolai J. Foss & Peter G. Klein, Organizing Entrepreneurial Judgment (2012).

[85] See, e.g., Sidak & Teece, Dynamic Competition, supra note 71, at 615.

[86] Menko, supra note 46.

[87] See Daniel A. Lyons, Innovations in Mobile Broadband Pricing 3-4, Mercatus Center Working Paper No. 14-08 (Mar. 2014), available at https://www.mercatus.org/research/working-papers/innovations-mobile-broadband-pricing.

[88] Id.

[89] AT&T, Sponsored Data from AT&T (last accessed Dec. 12, 2023), https://www.att.com/att/sponsoreddata/en.

[90] T-Mobile, Unlimited Video Streaming with Binge On (last accessed Dec. 12, 2023), https://www.t-mobile.com/tv-streaming/binge-on.

[91] J. Gregory Sidak & David J. Teece, supra, note 82, at 532-33.

[92] See infra Section III.A.

[93] See, e.g., Herbert Hovenkamp, The Rule of Reason, 70 Fla. L. R. 81 (2018) (“Vertical restraints should be found unlawful only when they facilitate an output reduction that serves to increase prices in relation to costs. To that extent, every anticompetitive vertical restrain must contain at least an implicit horizontal element, whether it be collusion or exclusion. The vast majority of purely vertical agreements pose no such threat. These conclusions are largely borne out by the case law. Once the rule of reason is applied to a vertical practice, few instances of it are condemned.”)

[94] NPRM at ¶ 56.

[95] Id.

[96] Id.

[97] ICLE, Comments on Refreshing the Record in Restoring Internet Freedom and Lifeline Proceedings in Light of the D.C. Circuit’s Mozilla Decision, WC Docket Nos. 17-108, 17-287, 11-42 (Apr. 20, 2020), at 9, available at https://laweconcenter.org/wp-content/uploads/2020/04/icle_rifo_record_refresh_comments_final-20200420.pdf (“But the widely different regulatory philosophies underlying the Orders—that of the RIFO’s light-touch regulation under Title I compared to the OIO’s more interventionist regulation based on the uncertain whims of a changing political environment under Title II—strongly suggests different levels of regulatory certainty. And it is virtually inevitable that the greater regime uncertainty under Title II would contribute to a reduction in investment and/or its less efficient and effectively deployment. Such an effect is likely more attenuated than the acute, immediate response many seem to be looking for. But it may be no less real and no less important.”)

[98] Brendan Carr, Dissenting Statement of Commissioner Brendan Carr, 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 (Nov. 15, 2023), https://docs.fcc.gov/public/attachments/FCC-23-100A3.pdf (Regarding digital discrimination rules, “The FCC reserves the right under this plan to regulate both ‘actions and omissions, whether recurring or a single instance.’ In other words, if you take any action, you may be liable, and if you do nothing, you may be liable. There is no path to complying with this standardless regime.”)

[99] See Edwin J. Elton & Martin J. Gruber, Modern Portfolio Theory and Investment Analysis (4^th ed, 1991).

[100] Wolfgang Briglauer, Carlo Cambini, Klaus Gugler, & Volker Stocker, Net Neutrality and High-Speed Broadband Networks: Evidence from OECD Countries, 55 Eur. J. Law Econ. 533–571 (2023).

[101] 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).

[102] NPRM at ¶ 56.

[103] NPRM at ¶ 157.

[104] FCC, Fact Sheet: FCC Chairwoman Rosenworcel Proposes to Restore Net Neutrality Rules (Sep. 26, 2023), available at https://docs.fcc.gov/public/attachments/DOC-397235A1.pdf.

[105] Rich Greenfield, Adding “Fast Lanes” Does Not Require Harming the Internet, Vox (May 14, 2014), https://www.vox.com/2014/5/14/11626812/adding-fast-lanes-does-not-require-harming-the-internet.

[106] Id.

[107] Catie Keck, A Look Under the Hood of the Most Successful Streaming Service on the Planet, The Verge (Nov. 17, 2021), https://www.theverge.com/22787426/netflix-cdn-open-connect.

[108] ICLE Comments., supra note 97 at 3-8. See also J. Gregory Sidak & David J. Teece, supra, note 82 at 533 (“Superior [quality of service] is a form of product differentiation, and it therefore increases welfare by increasing the production choices available to content and applications providers and the consumption choices available to end users. Finally, as in other two-sided platforms, optional business-to-business transactions for [quality of service] will allow broadband network operators to reduce subscription prices for broadband end users, promoting broadband adoption by end users, which will increase the value of the platform for all users.”).

[109] Axel Gautier & Robert Somogyi, Prioritization vs Zero-Rating: Discrimination on the Internet, 73 Int’l. J Ind. Org. 102662 (Dec. 2020).

[110] NPRM at ¶ 153.

[111] Id.

[112] Id. at ¶ 155.

[113] See Nilay Patel, Taylor Swift Fans Used Record Amounts of Data during the Eras Tour in North America, The Verge (Nov. 16, 2023), https://www.theverge.com/2023/11/16/23949041/taylor-swift-eras-tour-mobile-data-usage-att.

[114] Sandvine, Sandvine’s 2023 Global Internet Phenomena Report Shows 24% Jump in Video Traffic, with Netflix Volume Overtaking YouTube (Jan. 17, 2023), https://www.prnewswire.com/news-releases/sandvines-2023-global-internet-phenomena-report-shows-24-jump-in-video-traffic-with-netflix-volume-overtaking-youtube-301723445.html.

[115] Daeho Lee & Junseok Hwang, Network Neutrality and Difference in Efficiency Among Internet Application Service Providers: A Meta-Frontier Analysis, 35 Telecomm. Pol’y 764 (2011).

[116] Fangfan Li, Arian Akhavan Niaki, David Choffnes, Phillipa Gill, & Alan Mislove. A Large-Scale Analysis of Deployed Traffic Differentiation Practices, Association for Computing Machinery, Proceedings of the ACM Special Interest Group on Data Communication, SIGCOMM ’19 (2019), https://dl.acm.org/doi/pdf/10.1145/3341302.3342092.

[117] Christoph Bauner & Augusto Espin, Do Subscribers of Mobile Networks Care About Data Throttling?, 47 Telecom. Pol’y 102665 (Nov. 2023).

[118] Id. (“[U]sers may actually benefit from a modest degree of throttling as this preserves bandwidth and thus aides network stability and reliability. In other words, even if users get harmed by the direct effect of throttling (slower data transmission), the positive indirect effect (more reliable network) may outweigh this issue, so that users may prefer the throttled network. If this is the case, it would pose an additional argument against net neutrality regulation.”)

[119] Id.

[120] 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).

[121] Johnny Kampis, Johnny Kampis: FCC Push To Eliminate Data Caps Could Increase Broadband Rates For Many Users, Broadband Breakfast (Sep. 28, 2023), https://broadbandbreakfast.com/2023/09/johnny-kampis-fcc-push-to-eliminate-data-caps-could-increase-broadband-rates-for-many-users.

[122] Peter Christiansen, Survey Finds Nearly Half of America Unaware of Internet Data Cap Limits, HighSpeedInternet.com (Feb. 25, 2021), https://www.highspeedinternet.com/resources/data-caps-survey.

[123] See Working Group on Economic Impacts of Open Internet Frameworks, Policy Issues in Data Caps and Usage-Based Pricing, Open Internet Advisory Committee (Jul. 9, 2013), available at https://transition.fcc.gov/cgb/oiac/Economic-Impacts.pdf.

[124] See id. at 14-16.

[125] 2015 Order at ¶¶ 151-153.

[126] Id.

[127] Guz Hurwitz, The Not Neutrality of Tech Reporting: Discussing the Economics of Lifting Data Caps During a Stay-at-Home Crisis, Truth on the Market (Mar. 20, 2020), https://truthonthemarket.com/2020/03/20/the-not-neutrality-of-tech-reporting-discussing-the-economics-of-lifting-data-caps-during-a-stay-at-home-crisis.

[128] 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 (2017).

[129] See Scott Jordan, A Critical Survey of the Literature on Broadband Data Caps, 41 Telecomm. Pol’y 813 (2017).

[130] NPRM at ¶ 137.

[131] 2015 Order at ¶¶ 78-101; see also In the Matter of Protecting & Promoting the Open Internet, Dissenting Statement of Commissioner Michael O’Rielly, 30 F.C.C. Rcd. 5601, 5987 (2015) (“Even after enduring three weeks of spin, it is hard for me to believe that the Commission is establishing an entire Title II/net neutrality regime to protect against hypothetical harms. There is not a shred of evidence that any aspect of this structure is necessary. The D.C. Circuit called the prior, scaled-down version a “prophylactic” approach. I call it guilt by imagination.”).

[132] 2018 Order at ¶¶ 109-139.

[133] 2018 Order at ¶ 143.

[134] Stephen G. Breyer, Antitrust, Deregulation, and the Newly Liberated Marketplace, 75 Cal. L. Rev. 1005, 1007 (1987).

[135] Id.

[136] 2018 Order at ¶ 123. See also Joshua D. Wright & Thomas W. Hazlett, The Effect of Regulation on Broadband Markets: Evaluating the Empirical Evidence in the FCC’s 2015 “Open Internet” Order, 50 Rev. Indus. Org. 487, 489 (2017) (Network neutrality rules address conduct that “[i]f undertaken for anti-competitive purpose and achieving anti-competitive effect, [] would be deemed vertical foreclosure in economics (or under antitrust law).”). See also 2015 Order at ¶ 79 & note 123 (discussing past instances of alleged ISP misconduct that amounted to “limit[ations on] openness,” all of which were cognizable under the antitrust laws).

[137] 2015 Order at ¶ 63.

[138] Id. at ¶ 64.

[139] Id. at  ¶ 275.

[140] Id. at ¶ 140.

[141] See Patrick Rey & Jean Tirole, A Primer on Foreclosure, in III Handbook of Indus. Org. 2145 (Mark Armstrong & Rob Porter eds., 2007).

[142] NPRM at ¶ 23.

[143] See Rey & Tirole, A Primer on Foreclosure, supra note 140.

[144] See Francine Lafontaine & Margaret Slade, Vertical Integration and Firm Boundaries: The Evidence, 45 J. Econ. Lit. 629 (2007) (documenting the economic evidence showing that such vertical relationships are more likely to be competitively beneficial or benign than to raise serious threats of foreclosure).

[145] See Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 886-87 (2007) (holding that the per se rule should be applied “only after courts have had considerable experience with the type of restraint at issue” and “only if courts can predict with confidence that [the restraint] would be invalidated in all or almost all instances under the rule of reason” because it “‘lack[s] . . . any redeeming virtue.’” (citation omitted)).

[146] See D. Daniel Sokol, The Transformation of Vertical Restraints: Per Se Illegality, the Rule of Reason, and Per Se Legality, 79 Antitrust L.J. 1003, 1004 (2014) (“[T]he shift in the antitrust rules applied to [vertical restraints] has not been from per se illegality to the rule of reason, but has been a more dramatic shift from per se illegality to presumptive legality under the rule of reason”).

[147] NPRM at ¶ 136 (“The Commission’s transparency rule requires ISPs to publicly disclose the network practices, performance characteristics, and commercial terms of the BIAS they offer, including disclosure of any blocking, throttling, and affiliated or paid prioritization practices.”).

[148] See, e.g. Geoffrey A. Manne, The Hydraulic Theory of Disclosure Regulation and Other Costs of Disclosure, 58 Ala. L. Rev. 473 (2007).

[149] NPRM at ¶¶ 172-175.

[150] 47 U.S.C. § 201(b).

[151] 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.

[152] NPRM at ¶ 175.

[153] See NPRM at ¶¶ 80-83.

[154] King v. Burwell, 576 U.S. 473, 486 (2015) (quoting Utility Air Regulatory Group v. EPA, 573 U.S. 302, 324 (2014)).

[155] 141 S. Ct. 2485 (2021).

[156] Id. at 2489.

[157] Id.

[158] Id.

[159] 142 S. Ct. 661 (2022).

[160] Id. at 665.

[161] Id.

[162] Id.

[163] Id. at 669.

[164] 142 S. Ct. 2587 (2022).

[165] See id. at 2607-09.

[166] Id. at 2609.

[167] See id. at 2612.

[168] See id. at 2614.

[169] See id. at 2615-17.

[170] NFIB, 142 S. Ct. at 668.

[171] See, e.g., 2022 Broadband Capex Report, USTelecom (Sep. 8, 2023), https://ustelecom.org/research/2022-broadband-capex (“America’s broadband industry invested a record $102.4 billion in U.S. communications infrastructure in 2022, reflecting broadband providers’ determination to help achieve the national objective of affordable, reliable high-speed connectivity for all. The annual figure represents a 21-year high for investment from the communications sector and a 19% year-over-year increase.”).

[172] See NPRM at ¶ 1 (“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.”); 47 U.S.C. § 1701(1) (“[A]ccess to affordable, reliable, high-speed broadband is essential to full participation in modern life in the United States.”). See also 47 U.S.C. §§ 1722(1)(A)-(B) (“[A] broadband connection and digital literacy are increasingly critical to how individuals (A) participate in society, economy and civic institutions of the United States;” and “(B) access health care and essential services, obtain education, and build careers.”)

[173] See supra Part II.C.

[174] US Telecom v. FCC, 855 F.3d 381, 422 (D.C. Cir. 2016) (Kavanaugh, J., dissenting from denial of rehearing en banc).

[175] See NPRM at ¶¶ 103-113. See also FCC Fact Sheet, Safeguarding and Securing the Open Internet (Sept. 28, 2023) (“Propose to forbear from 26 Title II provisions, and clarify that the Commission will not regulate rates or require network unbundling.”).

[176] 573 US. 302, 328 (2014) (“We reaffirm the core administrative-law principle that an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate.”).

[177] See id. at 326 (“The Tailoring Rule is not just an announcement of EPA’s refusal to enforce the statutory permitting requirements; it purports to alter those requirements and to establish with the force of law that otherwise-prohibited conduct will not violate the Act. This alteration of the statutory requirements was crucial to EPA’s “tailoring” efforts. Without it, small entities with the potential to emit greenhouse gases in amounts exceeding the statutory thresholds would have remained subject to citizen suits—authorized by the Act.”).

[178] Id. at 325.

[179] Id. at 328.

[180] See US Telecom, 855 F.3d at 383-85 (Srinivasan, J. & Tatel, J., concurring in denial from rehearing en banc).

[181] See id. at 385 (“In Brand X, the Supreme Court definitively — and authoritatively, for our purposes as an inferior court — answered that question yes.”).

[182] See Brand X, 545 U.S. at 989 (“[T]he statute fails unambiguously to classify the telecommunications component of cable modem service as a distinct offering.”).

[183] See id. at 1005-14 (Scalia, J., dissenting).

[184] See US Telecom v. FCC, 825 F.3d 674 (D.C. Cir. 2016).

[185] See Mozilla Corp v. FCC, 940 F.3d 1 (D.C. Cir. 2019).

SUMMARY OF ARGUMENT

In 2018, the FCC issued its Restoring Internet Freedom Order, 33 FCC Rcd. 311 (2018) [“2018 Order”], which returned broadband Internet access service (“broadband”) to a classification as a Title I information service. The FCC determined that a “light touch” regulatory regime was necessary to promote investment in broadband. Id. ¶¶ 1-2. While removing the “no-blocking” and “no-throttling” rules previously imposed under the 2015 Open Internet Order, Protecting and Promoting the Open Internet, Report and Order on Remand, Declaratory Ruling, and Order, 30 FCC Rcd. 5601 (2015) [“2015 Order”], the FCC also removed the “general conduct” standard—an open-ended regulatory catch-all that would permit the FCC to examine any conduct of broadband providers that it deemed potentially threatening to Internet openness. Cf. 2018 Order ¶¶ 239-245. Yet, notably, the FCC elected to keep a version of the 2015 Order’s transparency rule in place, which requires broadband providers to disclose any blocking, throttling, paid prioritization, or similar conduct. Id.

In retaining the transparency rule, the FCC noted that the FTC and state attorneys general are in a position to prevent anticompetitive consumer harm through the enforcement of consumer protection and antitrust laws. See 2018 Order ¶ 142. Thus, the overarching goal of the 2018 Order was to ensure business conduct which could be beneficial to consumers was not foreclosed by regulatory fiat, as would have been the case under the 2015 Order, while empowering the FCC, FTC, and state attorneys general to identify and address discrete consumer harms.

The Mozilla court noted that the FCC could invoke conflict preemption principles in order to prevent inconsistent state laws from interfering with the 2018 Order. Mozilla Corp. v. FCC, 940 F.3d 1, 85 (D.C. Cir. 2019) (per curiam). Without such preemption, a patchwork of inconsistent state laws would confuse compliance efforts and drive up broadband deployment costs. Cf. Id. Relying as it does on a common carriage approach to regulating the Internet, and fragmenting the regulation of broadband providers between the federal and state levels, SB-822 is at odds with the purpose of the 2018 Order.

The district court found the balance of the equities and the public interest both weighed in favor of California in enforcing SB-822, stating the law “provides crucial protections for California’s economy, democracy, and society as a whole,” Transcript of Proceedings, American Cable Ass’n v. Becerra, No. 2:18 cv-02684 (E.D. Cal. Feb. 23, 2021) (ER-7–78) [“Tr.”], and that a preliminary injunction would “negatively impact the State of California more than [it would benefit] the ISP companies.” Id. at 69. In denying the motion for a preliminary injunction, the court also found the Appellants failed to show a likelihood of success on the merits. Id. at 67.

The district court wrongly concluded the balance of equities tips in favor of Defendant-Appellee, the state of California, and incorrectly assumed that the Appellants’ members would not suffer irreparable harm. The economics underlying broadband deployment, combined with competition and consumer protection law, provide adequate protection to consumers and firms in the marketplace without enforcement of SB-822. And, because of the sovereign immunity provided to California under the Eleventh Amendment, the potential damages suffered by the Appellants’ members are unable to be remedied. On the other hand, the enforcement of this law will significantly harm the Appellants’ members as well as the public by allowing states to create a patchwork of inconsistent laws and bans on consumer welfare-enhancing conduct like zero-rating.

The district court made crucial errors in its analysis when balancing the equities.

First, when evaluating the likelihood of ISPs acting in ways that would reduce Internet openness, it failed to consider the economic incentives that militate against this outcome.

ISPs operate as multi-sided markets—their ability to draw consumers and edge providers on both sides of their platforms depends on behavior that comports with consumer expectations.  Both broadband consumers and edge providers demand openness, and there is no reason to expect ISPs to systematically subvert those desires and risk losing revenue and suffering reputational harm. Contrary to the district court’s characterization, the good behavior of ISPs is not attributable to scrutiny during the pendency of the current litigation: rather, it is a rational response to consumer demand and part of a course of conduct that has existed for decades.

Second, the district court discounted the legal backdrop that both would hold ISPs to their promises, as well as prevent them from committing competitive harms.

All of the major ISPs have made public promises to refrain from blocking, throttling, or engaging in paid prioritization. See infra Part I (A) at 17.  Further, the FCC’s 2018 Order creates a transparency regime that would prevent ISPs from covertly engaging in the practices SB-822 seeks to prevent. The FTC’s Section 5 authority to prevent “unfair or deceptive acts or practices” empowers that agency to pursue ISPs that make such promises and break them while state attorneys general can also bring enforcement actions under state consumer protection laws. 2018 Order ¶¶ 140-41.

In addition to the consumer protection enforcement noted above, antitrust law provides a well-developed set of legal rules that would prevent ISP’s from engaging in anticompetitive conduct. This would include preventing ISPs from entering into anticompetitive agreements with each other, or with edge providers, that harm competition, as well as prevent anticompetitive unilateral conduct.

In summary, the district court failed to properly balance the equities and, in so doing, sanctioned net harm to the public interest. Both the underlying economic incentives and existing laws ensure ISPs will continue to provide broadband service that meets consumer expectations. By contrast, SB-822, in going further than even the 2015 Order, actually permits a great deal of harm against the public interest by presumptively banning practices, like zero-rating, that increase consumer welfare without harming competition.

I.        Introduction

Writing on behalf of the International Center for Law & Economics (ICLE), we thank the Federal Communications Commission (“FCC” or “the Commission”) for the opportunity to respond 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.

The new NPRM emphasizes the principles of an “open internet,” but falls short of providing a concrete operational definition of what this entails.[1] The Commission’s vague and open-ended description of a “open internet” introduces enormous ambiguities that could grant the FCC unwarranted and expanded scope of discretion. In suggesting that openness equates to basic consumer access, without clear limitations or exceptions, the order leaves room for interpretation of what constitutes “open” access. This not only hampers stakeholders from understanding the boundaries of compliance, but also gives the FCC an opaque veil of authority that could be applied both expansively and inconsistently.

Some critics see the FCC’s pursuit of common-carrier regulation of broadband internet as an attempt to “control” an industry with vast economic and political significance.[2] That may be true. As we discuss in Section II, a more charitable criticism is that the Commission mistakenly believes that the provision of broadband internet is a natural monopoly that is best served by utility-style regulation. Alternatively, it could be argued that the FCC mistakenly believes that a dynamic and competitive industry marked by rapid innovation, improving quality, and falling prices can be effectively regulated as if it were a public utility. Under any of these rationales, Title II regulation is mistaken at best, and nefarious at worst.

Although much has changed since the 2015 Order,[3] nothing has happened that newly justifies the Commission reimposing Title II on broadband service. Perhaps recognizing the difficulty this poses, the Commission offers several new justifications for Title II regulation. In particular, “national security” is offered as a primary justification. In the 2015 Order, “net neutrality” was mentioned nearly 70 times. In contrast, the recent NPRM uses the term only a handful of times: once in the text and the others in only two footnotes. The 2015 Order mentioned “national security” only three times, while the NPRM uses the term more than five dozen times.

In addition, the FCC’s NPRM provides several other new justifications for sweeping regulation of broadband-internet access:

• COVID-19: “[T]he 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.”[4]
• Federal spending on provider investments and consumer subsidies: “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.”[5]
• The need for a uniform national regulatory system: “[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.”[6]

We caution the Commission to take care when relying on these justifications, for several reasons. First, the COVID-19 justification is at odds with the way history unfolded. U.S. broadband providers’ responses to the steep increase in demand during the pandemic was a demonstrable success of broadband competition (especially compared to how networks abroad fared).[7]

The Commission’s reliance on the passage of the Infrastructure Investment and Jobs Act (IIJA) is also a problematic justification for Title II regulation. The legislative process would have been a perfect time for Congress to legislate net neutrality or Title II regulation as it was debating the investment of tens of billions of dollars to encourage broadband buildout for the next decade or so. But no such provisions were included in the spending bills. If anything, this should indicate that the Commission should refrain from such an excessive regulatory intervention.

Even the Commission’s newly enacted digital-discrimination rules undermine the case for Title II regulation. Congress included a very terse statement that the Commission should look into impermissible discrimination in broadband deployment, but gave zero indication that it wanted Title II reclassification to serve as a remedy, even if such discrimination was found.[8] In short, if Congress intended to regulate broadband internet under Title II, it had numerous opportunities to do so in the recent past, but chose otherwise.

When it comes to national security, Congress has created a number of entities that have oversight powers.[9] But despite recent legislative investment in broadband deployment, Congress gave no indication that it wished the FCC to become a body driven by a national-security mission.  Thus, the Commission’s attempt to step into this arena appears both redundant and outside its core competencies. This further suggests that imposing net neutrality under the guise of such justifications might be unfounded, rather than grounded in a changed internet landscape or emergent security threats.

Aside from these overarching concerns advising against Title II regulation, the following comments seek to evaluate the FCC’s numerous beliefs and conclusions, as well as answer questions posed by the NPRM.

In Section II, we report that, by most measures, U.S. broadband competition is vibrant and has improved dramatically since the COVID-19 pandemic. We show that, 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 increased internet access and intermodal competition among providers.

In that section, we also conclude that a mere “incentive and ability” of providers to engage in practices that pose a threat to “internet openness” (however defined) is insufficient justification to impose outright bans on certain practices that have been demonstrated to enhance internet performance, foster investment, and improve consumer and edge provider well-being. Moreover, robust and increasing broadband competition would place a substantial check on the “incentive and ability” for provider attempts to engage in anticompetitive or harmful conduct.

Rather than promoting “openness,” Title II may serve to suppress it, as it would ban or regulate both existing practices or future innovative practices that simultaneously boost provider returns and improve internet users’ experience. As such, Section II argues that the heavy-handed regulation proposed by the NPRM is likely to both reduce investment returns and increase the uncertainty of those returns. This would thereby stifle future broadband investment, especially among small and rural providers.

As discussed in Section II.C.2, paid prioritization has been demonstrated to benefit consumers and edge providers and, in some, cases may be necessary to deliver some high-demand internet services. We also present evidence that throttling of application-service providers is virtually nonexistent and that consumers are largely indifferent to throttling policies as currently practiced. While the NPRM does not anticipate regulating data caps or usage-based pricing, we argue that there is a significant likelihood these practices could be scrutinized under the proposed “internet conduct” rules. Both practices have been shown to be especially beneficial to low-income or low-usage internet subscribers.

Section III describes how already-existing laws and agencies are well-equipped to deal with competition, consumer protection, and national-security issues. Many of the issues the FCC uses to justify extending its purview do not require Title II reclassification, or even action from the FCC itself.

Lastly, in Section IV, we demonstrate that the FCC’s proposed rules will certainly invite challenge under the “major questions doctrine,” which requires a clear grant of authority from Congress when an agency action exercises powers of vast economic and political significance. Moreover, based on recent Supreme Court precedent, there is a significant likelihood that the Commission’s proposed Title II regulation will be struck down by the courts. Reclassification of broadband as a Title II telecommunications service would clearly be an exercise of powers of “vast economic and political significance.” Broadband providers have invested billions of dollars per year into building out reliable high-speed networks throughout the country, serving hundreds of millions of consumers.[10] Nearly every U.S. resident, business, public agency, and other organization uses broadband internet over large portions of the day. Both federal and state governments have supported this continued buildout through subsidies to providers and consumers. As then-Judge Brett Kavanaugh put it when considering the 2015 Order, the “FCC’s net neutrality rule is a major rule for the purposes of The Supreme Court’s major rules doctrine. Indeed, I believe that proposition is indisputable.”[11] It is also clear the classification of broadband under the Communications Act is ambiguous, as every court to review the question has found it to be so.[12]

II.      Title II Is Inappropriate to Regulate Broadband

The Commission’s NPRM proposes regulating broadband as a Title II telecommunications service. But such regulations are unnecessary to protect the public and will harm investment, competition, and innovation. Part II.A details the absence of evidence that would justify reclassifying broadband as a common carrier under Title II. Part II.B shows how the current “light-touch” regulatory approach under Title I promotes innovation and competition. Part II.C presents evidence that Title II reclassification will reduce investment, and Part II.D explains how the NPRM’s proposed rules will reduce innovation by broadband providers.

A.      No Adequate Justification to Change Regulatory Classification of Broadband Providers

The NPRM argues that the Commission must restore Title II authority to “safeguard the open Internet” by “clear rules to prevent Internet service providers from engaging in practices harmful to consumers, competition, and public safety….”[13] But the NPRM’s arguments to support this assertion are weak, and the evidence is sparse.

Part II.A.1 argues that the alleged harms to openness are based on poor economic logic and lack any evidence demonstrating that broadband providers have reduced “openness” in the absence of Title II regulation. Part II.A.2 examines the logic of regulating broadband as a monopoly utility, and finds it wanting in light of competitive conditions in the market. Part II.A.3 furthers that argument by detailing the level of competition in the market for high-speed internet, noting the growth in the number of providers, the falling prices and increasing speeds made available, and the increased level of intermodal competition since repeal of the 2015 Order.

1.        NPRM has not sufficiently supported its assertion of a threat to openness

In the NPRM, the Commission notes that:

We believe that the rules we propose today will establish a baseline that the Commission can use to prevent and address conduct that harms consumers and competition when it occurs. Above, we express our belief that consumers perceive and use BIAS as an essential service, critical to accessing healthcare, education, work, commerce, and civic engagement. Because of its importance, we further believe it is paramount that consumers be able to use their BIAS connections without degradation due to blocking, throttling, paid prioritization, or other harmful conduct.^[14]

Relatedly, the Commission roots its proposed rules in the so-called “incentive and ability [of ISPs] to engage in practices that pose a threat to Internet openness.”^[15]

But the NPRM’s proposed rules, rooted in the presumption of ISPs’ “incentive and ability” to engage in practices that threaten internet openness, rest on a speculative foundation, rather than any substantive record of violations. Given the voluminous scale of internet traffic, the evidence of actual infractions is remarkably scant. This paucity of evidence undermines the rationale for preemptive, industrywide prohibitions, which would be based on hypothetical future harms. The mere possibility of ISPs engaging in deleterious conduct does not, in itself, warrant imposing onerous rules that could impede investment in innovative business models.

The assertion that ISPs have the incentive and ability to harm open internet access lacks convincing substantiation of demonstrable harmful conduct.[16] Speculative harm cannot justify regulations that could dissuade ISPs from exploring novel and potentially pro-consumer arrangements. Where there is evidence of consumer ignorance of the tradeoffs inherent in various product offerings, the solution may lie in enhanced disclosure—providing notice and choice to consumers—not in the imposition of broad restrictions.

Furthermore, the Commission fails to distinguish between instances where so-called “paid prioritization” has pro-consumer benefits and where it may constitute an anticompetitive harm. Many business relationships that might be labeled as paid prioritization—such as Netflix’s collocation of data centers within different networks to expedite service and reduce overall network load—are unequivocally pro-consumer. Such arrangements are better understood as sensible network optimization, rather than as anticompetitive behavior.

This narrow focus on ISPs as a potential vector of consumer harm also overlooks the broader ecosystem in which content aggregators like Netflix or Google exert significant influence over access to content. These platforms can, and often do, have a more immediate effect on consumer access than do ISPs. While edge providers sometimes come under fire themselves (wrongly, in our view), it is relevant to assessing the desirability of these proposed rules whether edge providers are made more or less powerful if ISPs are constrained, and what effect that would have on consumer welfare. Relatedly, many of the concerns over blocking, throttling, and paid prioritization are, in essence, expressing a concern that these edge providers will be unable to successfully bargain with ISPs. This, however, is a strange basis for such rules, as many of these firms are as large as or larger than any particular ISP. Moreover, the power these large firms exert in business relationships with ISPs establishes conditions that have downstream benefits for all edge providers.

Thus, the NPRM’s concern over the need for “neutral” connection lanes fails to recognize that neutrality may not be the sole (or even the best) path to fostering innovation. Startups could benefit from making agreements with ISPs to ensure optimized data transmission, which could be more achievable and less costly than the NPRM suggests. Moreover, the emergence of distributed cloud computing blurs the lines between established firms and newcomers, as they often share the same infrastructure and delivery networks, muting the Commission’s concerns.

Before moving forward, the Commission should diligently investigate the likelihood of future harms absent regulation, considering that no concrete evidence has surfaced since the last two rounds of rules on this matter—or even prior—of ISPs using their alleged incentive and ability to affect consumers and edge providers detrimentally. The FCC should substantiate actual harm rather than legislate against conjectural threats. Moreover, the FCC might find that transparency rules alone, or even the mere risk of public disclosure without formal regulation, could sufficiently deter quality degradation without the need for more intrusive regulations.

2.        Widespread use of high-speed internet does not render broadband internet a public utility

The Commission concludes 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.”[17] The Commission appears to argue 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 thus 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.[18] Water, sewer, electricity, and natural gas are typically considered “natural” monopolies under this definition.[19] 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.[20]

Over time, innovations have eroded the “natural” monopolies in telephone and cable.[21] In 2000, 94% of U.S. households had a landline telephone, and only 42% had a mobile phone.[22] By 2018, those numbers flipped.[23] In 2015, 73% of households subscribed to cable or satellite-television service.[24] Today, fewer than half of U.S. households subscribe.[25] Much of that transition is due to the enormous improvements in broadband speed, reliability, and affordability discussed in Part II.A.3.a. Similarly, entry and intermodal competition from 5G, fixed wireless, and satellite—as discussed in Part II.A.3.c—has meant that more than 94% of the country can now access high-speed broadband from three or more providers, thereby eroding the already tenuous claims that broadband-internet service is akin to a utility.

Regulating a competitive industry as a monopoly utility is what former Justice Stephen Breyer identified as a regulatory “mismatch,” which he defined as:

[A]n area where the rationale for regulation, judged by empirical fact, is not compelling, or where there are apparently less restrictive or more incentive-based forms of governmental intervention that can obtain regulation’s purported objective. [26]

As we note throughout these comments, the federal government already has in place many laws, rules, and policies that could satisfy many of the objectives the FCC seeks with Title II reclassification. In nearly every case, existing regulations are less-restrictive, more incentive-based, or less-capricious than common-carrier regulation under Title II.

3.        Existing broadband competition renders common-carrier regulations unnecessary

The FCC seeks comment on the state of competition in broadband internet-access services.[27] The NPRM claims that more than one-third of households lack competitive choice for fixed broadband at speeds of 100/20 Mbps, and that 70% of rural households lack such choice.[28] Despite the fact that nearly one-in-eight households with at-home internet are mobile-only, the Commission concludes that fixed and mobile internet are not substitutable.[29] Against this backdrop, the FCC seeks comment regarding whether services with substantially different technologies can substitute for each other competitively, and whether consumers nationwide have an adequate choice of providers.[30]

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—such as satellite and 5G—have expanded internet access and intermodal competition among providers.

a.        More households are served by two or more providers

Criticisms of the current state of broadband deployment tend to presume it results from widespread market failure. Specifically, the critics believe 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.[31] For example, in her speech announcing the FCC’s latest proposal to regulate internet services under Title II, Chair Jessica Rosenworcel claimed that 80% of the country faces a monopoly or duopoly for 100 Mbps or higher download speeds.[32] But, in fact, nearly all of the 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.

The Federal Communications Commission (FCC) defines high-speed broadband as Internet service that offers speeds of at least 25/3 Mbps.[33] 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.[34] A location is considered “underserved” if the only options available offer speeds of less than 100/20 Mbps.[35] The third iteration of the National Broadband Map, released in November 2023, indicates:[36]

• 8% of locations have access to connections of 25/3 Mbps or higher;
• 5% of locations have access to speeds of 200/25 Mbps or higher.
• Only 6.2% of locations are unserved, and 2.6% are “underserved” with connections of less than 100/20 Mbps.

The most recent FCC data on U.S. broadband deployment finds that 90% of the population in 2021 was served by one or more providers offering 250/25 Mbps or higher speeds (Table 1).[37] That is more than double the share of the population five years earlier, when only 44% of Americans had access to such speeds.[38] In 2019, the FCC did not report the share of population with access to 1,000/100 Mbps speeds or higher. In 2021, 28% of the population had access to these gigabit download speeds.

Table 1 shows that, in 2021, more than 85% of the population was covered by two or more fixed broadband providers offering 25/3 Mbps or higher speeds and more than 60% of the country was covered by three or more providers providing such speeds. If satellite and 5G providers are included, then close to 100% of the country is served by two or more high-speed providers.

Moreover, the evidence indicates that broadband competition has increased over time, as measured by the number of competing high-speed providers (Figure 1).[39]

• 25/3 Mbps: In 2018, 73.0% of households had access to 25/3 Mbps speeds from only one or two fixed broadband providers and only 21.6% had access from three or more providers. In 2021, only 29.1% of households had access from one or two providers while 69.3% were served by three or more providers. Thus, the number of households served by three or more providers increased by 47.7 percentage points from 2018 through 2021.
• 100/20 Mbps: In 2018, 11.6% of households had no access to 100/20 Mbps speeds and 14.8% had access from three or more fixed broadband providers. In 2021, 5.4% of households had no access, while 21.3% were served by three or more providers. Thus, the number of households served by three or more providers increased by 6.5 percentage points from 2018 through 2021.

Since the 2018 Order[40] that reclassified broadband under Title I, broadband competition has increased. The share of households with high-speed fixed broadband connections offered by three or more providers has increased. Over the same period, entry and intermodal competition from 5G, fixed wireless, and satellite, as discussed in more depth below, has meant that more than 94% of the country can now access high-speed broadband from three or more providers. The growing consumer adoption of technologies that differ substantially from fixed broadband demonstrate that consumers view these technologies as competitive substitutes for each other.

b.        Broadband speeds have increased while prices have declined

Critics of the current state of U.S. broadband competition claim that U.S. prices are among the highest in the developed world because the U.S. market is not as competitive as other jurisdictions. For example, the Community Tech Network asks rhetorically, “So why does the internet cost so much more in the U.S. than in other countries? One possible answer is the lack of competition.”[41] Their article includes a graphic in which U.S. internet is described as “expensive and slow” while Australia is categorized as “fast and cheap.”

None of these claims appear to hold up under scrutiny. Instead, adjusting for consumption and download speeds, U.S. fixed-broadband pricing is among the lowest in the developed world. On a cost-per-megabit basis, the United States is among the least costly (Figure 2).[42] In addition, Speedtest’s Global Index of median speeds reports the United States as having the second-fastest median speed among OECD countries (Figure 3).[43]

 

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. Deployment costs are driven largely by population density and terrain, as well as each country’s unique regulatory and tax policies.[44] 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.[45]

A broadband-pricing index published annually by USTelecom reports that inflation-adjusted broadband prices for the most popular speed tiers among consumers have decreased by 54.7% from 2015 to 2023, or 5.6% a year.[46] Prices for the highest-speed tiers have decreased by 55.8% over the same period. The Producer Price Index for residential internet-access services decreased by 11.2% from 2015 through July 2023.[47] The median fixed-broadband connection in the United States delivers more than 207 Mbps download service, an 80% increase over the pre-pandemic median speed (Figure 4).[48]

An industry experiencing increasing quality along with decreasing prices is consistent with an industry that faces robust, if not increasing, competition. By these measures, the U.S. broadband industry, under Title I regulation, is both competitive and dynamic. To date, proponents of Title II regulation have not demonstrated that net neutrality or other common-carrier obligations have or will improve internet speeds or pricing for consumers.

c.        New technologies have increased intermodal competition

Nearly one-in-eight households with at-home internet are mobile-only.[49] 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.[50] Even so, the Commission concludes that fixed and mobile internet are not substitutable,[51] and seeks comments regarding its conclusion that, “fixed broadband and mobile wireless broadband are not substitutes in all cases,” as well as its finding that broadband service and mobile-wireless service “enable[] different situational uses.”[52]

“All cases” is an unreasonably high threshold that fails to recognize the central question of competition—namely, how do or would consumers respond to a significant change in prices, quality, or terms and conditions? It’s been long-established that goods and services need not be perfect—or even close—substitutes to exert competitive pressure.[53] Indeed, as we discuss in this section, consumer adoption of 5G and satellite broadband indicate that many consumers view fixed, mobile, and satellite broadband as competitive substitutes. Thus, any FCC evaluation of broadband competition must account for competitive threats and pressures associated with intermodal competition.

One of the most important changes to occur since the last two net-neutrality rounds is the intensification of intermodal competition, primarily due to the introduction and expansion of satellite and fixed-wireless options, alongside the rapid growth of high-speed 5G technology. These developments have not only diversified the array of available services, but also enhanced their quality and accessibility. Moreover, the advent of widely available satellite and fixed-wireless technologies offers viable alternatives to traditional broadband, breaking down previous geographical and infrastructural barriers. Satellite-broadband services, 5G wireless, and fixed wireless now offer robust competition in areas previously served by, at most, one or two fixed-broadband providers. When considering the state of competition in broadband access, acknowledging this growing intermodal competition is crucial.

The advent of low-earth orbit (LEO) satellite broadband has dramatically expanded the geographic reach of high-speed internet access. Starlink satellite service has been made available to all locations in the United States.[54] Starlink’s reported speeds are between 25/5 Mbps and 220/25 Mbps.[55] Project Kuiper has successfully launched its first test satellites,[56] with commercial service expected to begin in the second half of 2024.[57] Starlink and Project Kuiper provide new broadband options, especially for rural and remote households previously limited to slow DSL services. S&P Global Market Intelligence reports:

Satellite broadband subs … have lingered in the 1 million to 2 million subscriber range since 2008 but finally broke above 2 million last year due largely to growth at Low Earth Orbit new entrant Starlink.” [58]

Research published in 2017—two years before the first launch of Starlink satellites—found that households in manufactured or modular homes are more likely to adopt satellite internet instead of wired, cable connections.[59] One explanation is that many manufactured homes are not cable-ready and lack the wiring for cable-internet connections. Thus, despite the higher monthly costs, the “all-in” cost of satellite connections is relatively lower. These consumers clearly considered cable and satellite to be competitors. In research published last month, Gregory Rosston and Scott Wallsten highlighted the importance of satellite broadband for competition in rural areas:

Starlink (and its likely future LEO competitors) are creating real, facilities-based broadband competition in areas that are currently not served by low-latency service or are served only by companies that rely on heavy subsidies. The opportunities, therefore are broadband competition in rural areas and large reductions in taxpayer spending on broadband availability.[60]

Citing estimates from research firm Omdia, the Wall Street Journal reports that about 43% of U.S. consumers had 5G mobile subscriptions as of June 2023.[61] The increasing deployment of 5G wireless technology has led to faster speeds, lower latency, and greater reliability, leading to 5G becoming increasingly competitive with fixed broadband.

• Recent data reports 5G download speeds of 80.0 Mbps to 195.5 Mbps among the three largest U.S. providers.[62] These speeds are sufficient to support a household of two to five users, streaming high-resolution and 4K video, streaming music, online gaming, remote work, and home-security services.[63] Moreover, these speeds far exceed the FCC’s definition of “high-speed broadband” as speeds of at least 25/3 Mbps.[64]
• Analysis of Speedtest data by Ericsson finds “the vast majority” of speed tests have measured a latency of less than 50 ms for both 4G and 5G.[65] In comparison, the FCC reports cable latencies of between 13 ms and 26 ms and fiber latencies of between 9 ms and 13 ms.[66]

As the 5G rollout continues and more spectrum is deployed, wireless speeds will continue to increase.[67] And enhancements like 5G fixed-wireless access (FWA) enable carriers to compete directly with wired services. For example, one study concludes:

We find that at current prices, full FWA entry to a cable-only market, which constitutes approximately 30 percent of all cable modem subscribers in the United States, would convert 18 percent of cable-only households to FWA …. In cable/fiber markets, we find that full FWA entry would convert 2 percent of households from cable modem to FWA ….[68]

B.      Title I Enables Business-Model Experimentation and Differentiation

The NPRM assumes that net-neutrality rules assuring an “open Internet” are necessary to promote “edge innovation,” which creates consumer demand for high-speed internet and therefore “expanded investments in broadband infrastructure.”[69] But the NPRM essentially ignores the dynamic competition in broadband markets that leads to significant investment and innovation by broadband providers, as the market since the repeal 2015 Order shows. Part II.B.1 describes this dynamic competition in broadband markets. Part II.B.2 makes the case that Title I classification is what has allowed continued experimentation and innovation by broadband providers.

1.        Broadband markets are characterized by dynamic competition

Potential competition plays a pivotal role in dynamic technology markets. The threat that new technologies like LEO satellite and 5G fixed wireless could disrupt incumbents’ market share stimulates continued infrastructure investment and innovation. Even where substitution currently is incomplete, the looming threat of competitive disruption disciplines behavior.

To this point, as we have previously noted,[70] broadband-market competition should be understood as dynamic, not static. Related to the question of intermodal competition (which can often present imperfect substitutes) are market dynamics driven by potential competition:

In dynamic contexts, potential competitors can have much greater importance. What today appears merely to be a potential competitor can obliterate incumbents tomorrow in acts of Schumpeterian creative destruction. To exclude such a competitor from the boundaries of the market would clearly be a mistake.[71]

Where traditional competition analysis tends to gauge competitiveness using narrow, static indicia such as price levels and market share, a focus on “dynamic competition” may be more appropriate in technology-driven markets like broadband service. Dynamic markets are not typically composed of many competitors making marginal price adjustments to capture small slices of market share. Instead, such markets often experience sequential competition: firms vie to capture the entire market (or most of it), with would-be competitors and new entrants attempting to disrupt incumbents by introducing innovative new products or business models to supplant previous technologies.

An assumption that more concentration must mean less competition stems from a blackboard model of “perfect competition,” where innovation is merely a competitive dimension that emerges from a healthy market structure, rather than innovation driving the evolution of market structures. Rivalry is, of course, important, but no one seriously believes we live in a world of perfect competition characterized by atomistic firms competing to produce commodity goods and services. Yet this simplistic structuralist view of markets is frequently advanced in policy discussions.[72]

As Harold Demsetz famously observed, “the asserted relationship between market concentration and competition cannot be derived from existing theoretical considerations and that it is based largely on an incorrect understanding of the concept of competition or rivalry.”[73] In the case of natural monopolies, scale economies may make it more efficient for one firm to produce a good or service in a given market than it would be for two or more firms. Scale economies arise when high fixed costs are spread over a larger number of goods, allowing larger firms to enjoy lower per-unit costs of production. Due to economies of scale, markets like broadband, with high fixed costs, will tend to have fewer firms than markets with lower fixed costs. But Demsetz demonstrated that, even then, competition for the market itself can lead to an efficient result that prevents the typical welfare harms attributed to monopolies.[74]

The oft-neglected literature on dynamic capabilities and organizational strategy, by contrast, supports the supposition that innovation drives market structure.[75] For the last several decades, this literature has demonstrated that static price-effect-focused analysis is insufficient to understand dynamic markets. For dynamic markets, instead, it is performance that matters, with price as a secondary consideration and innovation as an important component of performance.^[76] So long as a market remains contestable, even if it’s highly concentrated, firms’ performance will determine the likelihood of new entrants. It is pressure from those potential new entrants that continues to drive market competitiveness.^[77]

Indeed, in highly dynamic economies, particularly those characterized by scale economies, there can be just as much reason to be concerned about too many competitors as by too few. Further, these dynamic markets tend to see a continual rebalancing between equilibrium and disruption:

With dynamic competition, new entrants and incumbents alike engage in new product and process development and other adjustments to change. Frequent new product introductions followed by rapid price declines are commonplace. Innovations stem from investment in R&D or from the improvement and combination of older technologies. Firms continuously introduce product innovations, and from time to time, dominant designs emerge. With innovation, the number of new entrants explodes, but once dominant designs emerge, implosions are likely, and markets become more concentrated. With dynamic competition, innovation and competition are tightly linked.[78]

Thus, in any given market at a given time, there is likely some optimal number of firms that maximizes social welfare.[79] That optimal number—which is sometimes just one and is never the maximum possible—is subject to change, as technological shocks affect the dominant paradigms controlling the market.[80] The optimal number of firms also varies with the strength of scale economies, such that consumers may benefit from an increase in concentration if economies of scale are strong enough.[81] Therefore, in dynamic markets characterized by high fixed costs and strong economies of scale, like broadband markets, the optimal number of firms is reached much more quickly than in, for instance, relatively more commodity-like markets.

Broadband has many of the attributes of a dynamic market, which tends to make static analyses of broadband competition fail to accurately appreciate competitive realities.[82] Broadband markets are driven by technological trends and can be disrupted by rapid modal shifts (e.g., from DSL to cable, or, looking forward, from cable to 5G wireless, satellite, and fixed wireless). Moreover, the infrastructure necessary to deliver broadband requires both long-term planning, as well as substantial sustained investment. Firms in broadband markets are driven not merely by potential entrants today, but by the necessity of intense and expensive planning for future shifts in technology and consumption preferences. Thus, firms operate with an eye toward future competitive pressures, not merely in response to winning market share in the present.

Contrary to some assumptions, the U.S. broadband market is characterized by a significant amount of entry (and exit). As Connolly & Prieger find:

The striking conclusion is that there is a tremendous amount of dynamic activity in the US broadband market. In the national market, the entry rate averages 14-19% annually, which is greater than the entry rates the economic literature has found for many other industries. The exit rate for broadband is also higher than for other industries, but not as high as the entry rate, so that net entry averages 3.1% annually. With narrower geographic or service type market definitions, the entry rates average from 24% to an astounding 49% per annum.[83]

Thus, broadband providers must balance the need to offer attractive pricing in response to immediate competitive pressures with a simultaneous need to make risky and costly investments in technological upgrades in order to compete with advanced technologies that may not be implemented for a decade or more.

Just as market share is a poor indicator of competition, basic accounting measures of profitability and investment often fail to demonstrate how risk/return expectations are realized in dynamic markets over the entire innovation lifecycle. A very large and very profitable ISP may have experienced prior negative returns on invested capital, a result of the need to assume risk and make enormous investments under conditions of uncertainty. The broadband market is constantly evolving as a result of historical and ongoing infrastructure investment, rapidly changing technology, the evolution of content and content-delivery technology, new regulations, and shifting usage patterns, among other factors. Facilities-based competition (e.g., among fiber, cable, mobile, and satellite) has ebbed and flowed depending on these various characteristics, but it has consistently produced higher-quality connectivity at lower quality-adjusted prices. An accurate assessment of competitiveness in broadband markets must take account of all these characteristics.

Further, it is well-known that process and product innovation does not arise solely from new entry; incumbent firms frequently are important sources of innovation, as well as increased market competitiveness.[84] Dynamic analysis does take entry seriously, but it is much more sensitive to potential entry as a constraint on incumbents than a structuralist view would permit. Thus, for example, an incumbent broadband provider that offers a 250 Mbps tier must consider the potential capabilities of an existing competitor that only offers 100 Mbps service; it must incorporate potential threats from that competitor in its decision matrix when evaluating whether to upgrade its network to 1 Gbps in order to retain its customer base. An incumbent’s dominant position can quickly erode thanks to imperfect in-market substitutes, as well as from out-of-market firms that may decide to enter in the future.[85]

2.        Title I classification promotes dynamic competition

The debate surrounding the optimal regulatory framework for broadband services often hinges on finding a balance that fosters innovation and consumer welfare without stifling competition. The broadband industry has thrived, for decades delivering lower prices and faster speeds under a Title I classification.^[86] History has demonstrated that a light-touch regulatory regime under Title I of the Communications Act is the most conducive environment to achieve these objectives.

One of the primary functions of a firm is to discover consumer needs, a process that frequently requires firms to “think outside the box.” To attract and retain customers, firms must experiment with offerings that introduce competition from unexpected quarters and keep competitive pressures in place through technological and business-model innovation.

Light-touch regulatory frameworks are inherently more compatible with this approach than are more onerous regimes, like Title II of the Communications Act. For example, in 2011, MetroPCS attempted to introduce a limited data plan offering subsidized, unlimited access to YouTube and other content providers, targeting price-sensitive consumers.^[87] This plan, though unconventional, was poised to help bridge the digital divide by making wireless data more accessible to a segment traditionally underserved by larger carriers. This type of business model is a non-neutral form of paid prioritization, but it would very likely have helped price-conscious consumers access more internet services. MetroPCS ultimately abandoned this plan, and such a plan would almost certainly run afoul of the proposed rules in this NPRM.^[88]

Since then, ISPs have experimented with other potentially non-neutral paid-prioritization approaches that nonetheless would yield enormous consumer surplus, such as AT&T’s Sponsored Data program^[89] and T-Mobile’s Binge On.^[90] Such business models provide more choices, potentially lower prices, and introduce competitive threats to other players in the market. Ex ante rules that presumptively ban this kind of experimentation foreclose the ability to discover if such models actually serve the interests of consumers in practice.

And the harms that flow from reduced innovation affect not just ISPs and their consumers, but all parts of the internet ecosystem. As Sidak and Teece have observed:

The lost benefits [of bans on paid prioritization] would affect both end users and suppliers of content and applications. Optional business-to-business transactions for QoS will enhance the efficiency of traffic flow over broadband networks, reducing congestion. That enhanced efficiency benefits both the end users receiving content or applications and the content providers whose content or applications are demanded. Superior QoS is a form of product differentiation, and it therefore increases welfare by increasing the production choices available to content and applications providers and the consumption choices available to end users. Finally, as in other two-sided platforms, optional business-to-business transactions for QoS will allow broadband network operators to reduce subscription prices for broadband end users, promoting broadband adoption by end users, which will increase the value of the platform for all users.^[91]

This follows from the nature of ISPs as platforms sitting at the center of a two-sided market. On one side are end users who pay the ISP for access to the internet; on the other are content providers who want access to the end users. A ban on paid prioritization assures that the ISP can monetize only one side of the market. Aside from putting upward pricing pressure on end consumers, this also has a detrimental effect on the overall value of the platform for users and content providers alike.

Prescriptive ex ante regulations under Title II amount to per se bans on certain conduct, without even inquiring whether such conduct is a net harm. Antitrust law, which is sensitive to exactly the sort of vertical harms that are the subject of concern in this NPRM,^[92] has developed rule-of-reason analysis to parse when challenged conduct is harmful to consumer welfare.^[93] That is, antitrust law does not assume that vertical restraints always harm consumers, but has learned that, in many cases, vertical restraints are a net benefit. But this analysis always occurs ex post, allowing companies to experiment with innovative business models like the many variations of paid prioritization.

C.      Title II Reclassification Introduces Regulatory Uncertainty

The Commission tentatively deems unsubstantiated the 2018 Order’s conclusions that ISP investment is closely tied to the Title II classification.[94] This is because the Commission now concludes that network-infrastructure owners make long-term, irreversible investments and that the adoption of orders reclassifying broadband internet-access services would be unlikely to change these investment decisions. In addition, because the Commission received conflicting viewpoints on the actual effect of Title II classification on investment, it concludes that no one can “quantify with any reasonable degree of accuracy how either a Title I or a Title II approach may affect future investment.”[95] Instead, the Commission tentatively concludes that changes in ISP investment following adoption of reclassification orders were more likely related to factors such as economic conditions, technology changes, and general business decisions, rather than to Title I or Title II classification.[96] The Commission seeks comments on these findings, beliefs, and conclusions.

Put simply, Title II reclassification will hinder investment. The see-sawing between Title I and Title II regulation over the years has already injected regulatory uncertainty into the broadband market. Reimposing Title II regulations will inject additional uncertainty.[97] This uncertainty is compounded by the FCC’s recent digital-discrimination rules. Title II combined with digital discrimination imposes a double whammy of ex ante regulation of some conduct, combined with ex post monitoring, scrutiny, and enforcement of vast array of other conduct.[98]

Firms’ investment decisions are often likened to a pipeline. But a more appropriate analogy would be an assembly line, where investment opportunities are investigated and evaluated. Opportunities with negative returns on investment are rejected and those with positive returns are further evaluated and ranked. Because firms have limited resources, some of the investments with positive returns are rejected. Once a firm decides to pursue an investment opportunity, the project is further evaluated throughout the deployment timeframe. Just as a product can be pulled from the assembly line for defects, investments can be pulled for economic or technical defects. Generally speaking, the further down the assembly line the project goes, the less likely it is to be pulled. Thus, an interruption at the end of the assembly line is likely to be less disruptive than an interruption at the beginning.

In this sense, the Commission is correct to conclude that Title II classification would have relatively less impact on investments that are near the end of their assembly line. But that observation misses the much bigger picture of investments at the beginning of the assembly line and potential investments that are still in the investigation and evaluation stage. For these projects, Title II classification can turn projects with positive expected returns into projects with negative expected returns. In addition, the regulatory uncertainty that is endemic to Title II regulation reduces firms’ confidence in the reliability of their return-on-investment projections. Because of the well-known and widely accepted risk-return tradeoff, firms facing increased uncertainty in investment returns will demand higher expected returns from the investments they pursue.[99]

Put simply, Title II classification may not have a significant effect on investments near completion, but could have a statistically and economically significant impact on future and early-stage investments. Recently published peer-reviewed research supports this conclusion.

Wolfgang Briglauer and his co-authors examine the impact of net-neutrality regulations on broadband-network investment, specifically fiber-optic networks in OECD countries.[100] Roslyn Layton and Mark Jamison describe Briglauer, et al.’s research as “the only empirical, non-anecdotal analysis of net neutrality and investment to date.”[101] Using panel data from 2000 through 2021, Briglauer and his co-authors find evidence that net-neutrality regulations have a significant negative impact on fiber-optic network investment by internet service providers. They employ several econometric techniques, including fixed effects and instrumental variables models, to establish evidence of a causal relationship between net-neutrality rules and reduced investment. The main finding is that the introduction of net-neutrality regulations leads to an estimated 22-25% decrease in new fiber-optic network investments by ISPs.

Briglauer et al. argue their statistical analysis provides evidence that strict net-neutrality rules tend to slow deployment of new high-speed broadband connections. They find the negative impact manifests with a delay, rather than immediately, likely due to rigidities and lags in broadband-deployment projects, thus pointing to a long-run effect. In addition, their fiber investment variable measures newly installed fiber connections, representing new broadband-infrastructure capacity. This is more indicative of long-run capital investment rather than short-run variations in spending.

Briglauer et al. control for other factors unrelated to net-neutrality regulations by including macroeconomic conditions relevant for investment decisions, such as long-term interest rates and a measure of investment freedom. They also control for deployment costs, measured by population density and wages. In addition, their statistical model includes measures of cable competition, mobile competition, telecommunications services prices, and the number of broadband subscriptions. In many cases, these control variables have a statistically significant relationship with fiber investment. Nevertheless, even controlling for these other factors, the authors found that net-neutrality regulations were associated with decreased fiber-optic network investments by ISPs.

The Commission concludes that “changes in ISP investment following the adoption of each Order were more likely the result of other factors unrelated to the classification of BIAS, such as broader economic conditions.”[102] In this framing, it seems the Commission is arguing that if something contributes “more” (however “more” is measured) to investment than Title II classification, then the Commission should conclude that classification has no effect. But this is the wrong framing. Using statistical analysis, the effect of net-neutrality regulations on investment can be estimated while controlling for these other variables. The fact that other variables also affect investment does not invalidate a finding that net-neutrality regulations have some statistically and economically significant negative relationship with investment.

D.     Title II Would Deter Future Innovation in Business Models

1.        Paid prioritization is an essential component of many online business models

The Commission proposes to ban paid or affiliated prioritization arrangements, concluding such arrangements harm consumers, competition, and innovation, as well as creating disincentives to promote broadband deployment.”[103] Chair Rosensworcel has characterized paid prioritization as creating “fast lanes that favor those who can pay for access.”[104] This framing invites the question that was raised years ago, “Do fast lanes mean there are, by definition, slow lanes?”[105] The answer is “no,” as explained by Vox:

An ISP’s bandwidth is not fixed at current levels: As MVPDs shift to all-digital infrastructures, they have significant capacity to dedicate a larger portion of their “pipes” to broadband, which can meaningfully increase bandwidth available to consumers from today’s levels.

Think of bandwidth as a highway: If an entirely new lane is added at the ISP’s expense, that does not harm anyone riding along on the preexisting highway. We struggle to understand why enabling an “extra” HOV lane is bad policy that requires government regulation.

One should not simply assume that the creation of fast lanes of dedicated bandwidth forces everyone else who chooses not to pay ISPs, or cannot pay ISPs, into slow lanes. While those lanes may be slower than the fast lanes, they were slower with or without the fast lanes.

And if bandwidth-heavy traffic that would have traveled over the open Internet (adding to congestion) is offloaded onto a separate fast lane that does not impair the preexisting pipe’s bandwidth capabilities, it should actually ease congestion on the existing lanes, rather than create slow lanes.[106]

Prioritization is a longstanding and widespread practice and, as discussed at length in The Verge regarding Netflix’s Open Connect technology, the internet can’t work without some form of it:

When Open Connect originally launched a decade ago, the service started working collaboratively with ISPs on deployment. Netflix provides ISPs with the servers for free, and Netflix has an internal reliability team that works with ISP resources to maintain the servers. The benefit to ISPs, according to both Netflix and Akamai, is fewer costs to ISPs by alleviating the need for them to have to fetch copies of content themselves.[107]

Indeed, the Verge piece makes clear that even paid prioritization can be an essential tool for edge providers. As we’ve previously noted, paid prioritization offers an economically efficient means to distribute the costs of network optimization.[108]

Axel Gautier and Robert Somogyi developed a model that includes both paid prioritization and zero rating and conclude:

Prioritization is the preferred option of both the ISP and consumers under severe congestion and high-value content, because the low price charged by the ISP to consumers is counterbalanced by large payments from the [content providers].[109]

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.

2. Throttling is an effective traffic-management tool

The Commission proposes to ban throttling lawful content, applications, services, and nonharmful devices.[110] While the Commission notes that throttling is “not outright blocking,” it also concludes such conduct “can have the same effects as outright blocking.”[111] The proposed ban would not ban throttling when it is “based on a choice clearly made by the end user,” such as a consumer’s choice of a plan in which a set amount of data is provided at one speed tier and any remaining data is provided at a lower tier.[112]

Internet bandwidth is a scarce and congestible resource subject to wild swings in consumer use. For example, Taylor Swift’s 2023 U.S. concerts have been associated with record-breaking levels of 5G data use on AT&T’s network.[113] Thus, allowing application-specific throttling gives companies incentives to streamline data demands. For mobile networks, excessive data usage impacts spectrum resources available to other customers. If networks cannot limit bandwidth-hungry apps during busy periods, then smartphone app developers lose incentives to tighten data usage. As internet-video traffic occupies about two-thirds of bandwidth, networks need some ability to manage congestion.[114] Outright throttling bans, rather than specific rules against anticompetitive discrimination, eliminate useful tools.

There is a dearth of empirical research regarding the throttling of application-service providers. In the only known published academic research, Daeho Lee and Junseok Hwang categorize application-service providers into four groups by bandwidth-usage attributes and latency sensitivity.[115] Using data from South Korea, they test the hypothesis that ISPs would be more likely to discriminate against content providers needing more bandwidth and more sensitive to latency. A regression of estimated technology-gap ratios on these variables, however, shows no significance, suggesting that ISPs do not discriminate against content providers based on bandwidth usage or latency. Using crowdsourced measurements across 2,735 ISPs in 183 countries and regions, Li et al. find that U.S. mobile providers seem to throttle content providers, but not to the extent in which consumers would likely notice.[116]

On the consumer side, recent research published in Telecommunications Policy finds no evidence that subscribers change their behavior in the face of throttled data rates.[117] Christoph Bauner and Augusto Espin analyze throughput levels measured for mobile ISPs in the United States with usage data to evaluate how sensitive users are to throttling. Using regression analysis of app usage on various measures of throttling, Bauner & Espin find no significant effect of data throughput on app usage. They argue that users may benefit from a modest degree of throttling when it aids network stability and reliability.[118] Bauner & Espin conclude their finding “seemingly weakens the … argument in favor of net neutrality rules.”[119]

In another consumer study, Hyun Ji Lee and Brian Whitacre found that low-income users were willing to pay for an extra GB of data each month, but were not willing to pay extra for a higher speed.[120] This is likely because, if a subscriber has a higher data limit, then they have a lower chance of being throttled for exceeding the cap. Lee & Whitacre’s results indicate Lifeline consumers are willing to pay for the option to use more unthrottled data, but are not willing to pay for higher speeds at all levels of data usage. 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.

If, in fact, ISPs do not generally engage in throttling application-service providers and, when throttling does happen, consumers do not significantly change their usage in the face of throttling, then a ban on throttling is a solution in search of problem. In fact, it could be a solution that is worse than any perceived problem. A ban on data throttling removes essential network-management tools that could prevent congestion and improve overall customer experience. Moreover, discrimination against specific applications or competing services can already be scrutinized under existing antitrust and consumer-protection laws, as discussed in Part III.

3. Data caps and usage-based pricing can benefit both consumers and providers

In addition to the Commission’s proposed rules prohibiting throttling, the agency is also investigating data caps and usage-based pricing (UBP).[121] A 2021 survey reports that, during the pandemic, 37% of those surveyed hit their data cap, and 68% of those who exceeded their data-cap limit paid overage fees.[122]

Data caps and UBP are not a new issue. In 2013, an FCC advisory committee issued a report on data caps and UBP.[123] That report identified several ways in which the policies improve network performance, consumer experience, and investment and innovation among ISPs and edge providers:

• Data caps allow ISPs to employ various forms of price discrimination to recover the substantial fixed costs of building broadband networks. Without the ability to charge heavier users more through caps or usage-based pricing, ISPs lose flexibility in designing business models that align costs and willingness-to-pay. This could hamper their incentives and financial ability to continue investing in next-generation network upgrades.
• The ability to implement data caps or UBP provides incentive for internet application and edge service providers to develop more efficient ways of delivering data-intensive services. For example, data caps may “encourage edge providers to innovate more efficient means of delivering their services” by optimizing video compression algorithms and streamlining data transfers. Removing the possibility of caps or UBP eliminates a motivation for driving such innovation on the edge provider side.
• Prohibiting data caps or UBP would restrict future business-model experimentation between ISPs and consumers in response to evolving internet-usage patterns and demands. As technology enables new bandwidth-hungry apps and consumer behavior shifts, a strict ban on caps limits the pricing and service optionsthat ISPs can explore to sustainably meet that demand.[124]

While the NPRM is silent on data caps and UBP, the 2015 Order noted that data caps “may benefit consumers by offering them more choices over a greater range of service options,” but left open the possibility of future regulation:[125]

The record also reflects differing views over some broadband providers’ practices with respect to usage allowances (also called “data caps”). … Usage allowances may benefit consumers by offering them more choices over a greater range of service options, and, for mobile broadband networks, such plans are the industry norm today, in part reflecting the different capacity issues on mobile networks. Conversely, some commenters have expressed concern that such practices can potentially be used by broadband providers to disadvantage competing over-the-top providers. Given the unresolved debate concerning the benefits and drawbacks of data allowances and usage-based pricing plans, we decline to make blanket findings about these practices and will address concerns under the no-unreasonable interference/disadvantage on a case-by-case basis.[126]

Gus Hurwitz points out that data caps are a way of offering lower-priced services to lower-need users.[127] They are also a way of apportioning the cost of those networks in proportion to the intensity of a given user’s usage. He notes that, if all users faced the same prices regardless of their usage, there would be no marginal cost to incremental usage. Thus, users and content providers would have little incentive to consider their bandwidth usage. Network congestion does not go away by lifting data caps. Instead, it may be worsened, especially if there is no additional cost associated with additional usage.

As we note above, Lee & 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.[128] This indicates that even Lifeline subscribers have a positive willingness-to-pay for a greater data allowance.

Regardless of the effects of prohibiting data caps or UBP on consumers and providers, the more pernicious risk is the legal uncertainty of these practices under Title II regulation. Although the NPRM does not identify any specific proposals regarding data caps or UBP, there is a strong likelihood that these practices could be scrutinized or regulated under the overly broad proposed “conduct rules.” For example, Scott Jordan provides a thorough review of possible data-cap practices and which ones might fall afoul of the 2015 Order.[129] He concludes:

• Heavy-users caps on mobile-broadband service would likely satisfy the Order’s rules;
• Profit-maximizing caps on mobile-broadband service may or may not satisfy the rules; and
• Caps on fixed-broadband service are unlikely to satisfy the rules.

Jordan’s comprehensive survey demonstrates that many data-cap practices are in a gray zone of uncertainty regarding whether they would or would not satisfy the FCC’s conduct rules. This uncertainty would, by itself, likely stifle experimentation with innovative business models and practices, thereby hindering investment and diminishing users’ experiences.

III.    Existing Policies Protect Consumers, National Security, and Public Safety

The Commission seeks comments on whether consumer-protection and antitrust laws provide sufficient protections against blocking, throttling, paid prioritization, and “other conduct that harms the open Internet.][130] In this section, we note that the United States has a multiplicity of agencies, laws, regulations, and rules that span competition, consumer-protection, and national-security issues. The Commission has provided little to no evidence that the existing regulatory regime has been deficient in enforcing existing policies or that new policies are needed—particularly outside of a congressional mandate.

A.      Antitrust and Consumer Protection

Fundamental to the Commission’s position in the 2018 Order was the reasonable conclusion that ensuring ISPs do not interfere with consumers’ access to content over the internet would best be effected by adopting a competition and consumer-protection oriented approach. This is consistent with the Commission’s historical, deregulatory approach to information services, including in the 2015 Order. Since 2018, nothing has changed to disturb the soundness of this approach.

Core to the distinction in these approaches is an evaluation of the appropriate way to judge risk.  The 2015 Order was premised on the theory that because ISPs have any incentive and ability to engage in problematic conduct, they thus will very likely engage in that conduct.[131]  The Commission used this assumption to justify strong ex ante regulation to curtail such expected conduct. In the 2018 Order, rather than simply presuming harm, the Commission undertook an extensive, thorough, and fact-based analysis to first assess the likely risk of harm.[132] Based on this analysis, the Commission concluded that the risk of harmful conduct was low, in terms of both the likelihood that ISPs will engage in such conduct and its potential adverse effects on consumers. Because this risk is low, the Commission reasonably determined that a “light touch” ex post competition-oriented regulatory approach was preferable to the ex ante prescriptive rules adopted in the 2015 Order and under consideration in this NPRM.

We believe that the Commission had the better analysis in 2018 and should continue to support this approach. Indeed, in the long history of the net-neutrality debates, the justifications for imposing Title II obligations on ISPs have been rooted in the precautionary principle, with little or no actual evidence produced demonstrating any intentional violation of “neutrality” principles. And since 2018, no other evidence has been produced.

The ideal regulatory framework for dealing with potential violations of neutrality principles is an ex post regulatory approach that reflects well-established competition law principles and is commensurate with the actual degree of risk and extent of harm associated with ISP misconduct, while also mitigating against the risk that over-regulation that would harm consumers by curtailing pro-competitive ISP activity.

As the Commission observed in the 2018 Order, “[t]he Communications Act includes an antitrust savings clause, so the antitrust laws apply with equal vigor to entities regulated by the Commission.”[133] Thus, the Commission has already struck the proper balance between indirect antitrust enforcement and direct regulation under the Communications Act, which incorporates competition policy as the generally applicable regulatory “default” in the absence of specific statutory mandates. As Justice Breyer has observed, “[r]egulation is viewed as a substitute for competition, to be used only as a weapon of last resort—as a heroic cure reserved for a serious disease.”[134]

Of course, the Communications Act does not speak directly to “net neutrality” harms. But to the extent the act permits the Commission to regulate in this area, it does so largely by requiring the agency to choose between Title I and Title II classifications, reserving Title II for circumstances where the Commission determines that the risk of harm from providers is sufficiently great that ex ante, prescriptive regulation is appropriate—“as a heroic cure reserved for a serious disease.”[135]

Moreover, the Commission’s prior efforts to promote net neutrality overlap substantially, if not entirely, with concerns over ISPs engaging in anticompetitive conduct. In the 2018 Order, the Commission specifically noted that this was a necessary logical justification for its previous order, observing that: “The premise of Title II and other public utility regulation is that ISPs can exercise market power sufficient to substantially distort economic efficiency and harm end users.”[136]

In the 2015 Order, the Commission acknowledged that “[c]ommitment to robust competition and open networks defined Commission policy at the outset of the digital revolution,”[137] and that “[t]he principles of open access, competition, and consumer choice embodied in Carterfone and the Computer Inquires have continued to guide Commission policy in the Internet era[.]”[138]  Likewise, the Commission explicitly acknowledged in the 2015 Order that its asserted authority under Section 706 was based, at least in part, on a mandate to promote competition.[139] Most tellingly, in a section titled “Competitive Effects,” the Commission noted that:

As the Commission has found previously, broadband providers have incentives to interfere with and disadvantage the operation of third-party Internet-based services that compete with the providers’ own services. Practices that have anti-competitive effects in the market for applications, services, content, or devices would likely unreasonably interfere with or unreasonably disadvantage edge providers’ ability to reach consumers in ways that would have a dampening effect on innovation, interrupting the virtuous cycle.  As such, these anticompetitive practices are likely to harm consumers’ and edge providers’ ability to use broadband Internet access service to reach one another . . . .[140]

Thus, as the Commission itself acknowledged in the 2015 Order, competition—and, by implication, anticompetitive behavior of ISPs—is one of the core concerns that drove development of internet policy. Indeed, in the present NPRM, much of the feared harms mentioned are largely derived from vertical foreclosure theory. Namely, they stem from the classic antitrust concern that dominant firms in a vertical supply chain may foreclose competitors from access to consumers, or extract supracompetitive prices from input providers.[141] For example, the NPRM declares that:

[W]e also propose to reinstate rules that prohibit ISPs from blocking or throttling the information transmitted over their networks or engaging in paid or affiliated prioritization arrangements. Additionally, we propose to reinstate a general conduct standard that would prohibit practices that cause unreasonable interference or unreasonable disadvantage to consumers or edge providers.[142]

These instances of potential ISP misconduct raise straightforward antitrust concerns with vertical conduct, squarely within the purview of antitrust law.[143] Importantly, antitrust enforcers and courts—following antitrust economists—assess these vertical restraints under the rule of reason, avoiding their presumptive condemnation because they only rarely result in actual anticompetitive harm.[144]

Under this 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.

In fact, only a few types of conduct are presumptively condemned, and then only when experience has demonstrated that they are more-often-than-not harmful.[145] Vertical restraints are never evaluated under this per se standard.[146] With such a competition framework for assessing conduct that might threaten “Internet openness,” the Commission would be well-positioned to detect and remedy harmful conduct.

B.      The Transparency Rule Is Adequate for Consumer Protection

One of the longstanding policies available to protect consumers is the Commission’s transparency rule. The existing transparency rule, as upheld by the D.C. Circuit in Verizon v. FCC, mandates that broadband internet-access service providers disclose network-management practices, performance, and commercial terms.[147] This rule, applicable to both fixed and mobile providers, is integral for enabling consumers and edge providers to make informed choices. This rule has, in one form or another, been operational since 2010, and has served as a valuable consumer-protection measure.

The Commission is, however, considering extending this rule in a number of ways. It’s important to keep in mind that no policy extended indefinitely presents an unalloyed good: even transparency requirements, taken too far, can bring more costs than benefits.[148] For example, the proposed enhancements include more tailored disclosures to various stakeholders—including consumers, edge providers, and the FCC[149]—that, despite best intentions, may impose significant costs in the form of compliance burdens on ISPs, while doing little if anything to inform consumers meaningfully.

Additionally, a rule change that leads to the publication of information like pricing will functionally resemble a de facto tariff system. Tariffing, however, is a core component of common carriage.[150] Thus, if the Commission opts not to reclassify under Title II, imposition of such a de facto tariff could be a violation of Section 706. Moreover, regulatory pressure to report pricing in uniform ways could lead to uniform pricing, which, though benign-sounding, could lead to downstream changes in service level and pricing that do not ultimately increase consumer welfare.

For example, although at times difficult to follow, internet-service pricing that is designed around discounts and incentives could be used to benefit economically vulnerable consumers and attract or retain them through a form of price discrimination. If, however, rates converge on a uniform schedule, it is possible that these forms of discounts and incentives will disappear, and that pricing will reflect a mean that is more difficult for lower-income consumers. This possibility has increased substantially with the FCC’s recently adopted digital-discrimination rules, which explicitly subject pricing, discounts, incentives and other terms and conditions to scrutiny and enforcement under the rules.[151] Thus, even in the absence of Title II regulation, the proposed reporting requirements can work hand-in-hand with the digital-discrimination rules to regulate rates in the direction of uniform pricing across providers, thereby limiting the scope of competition for broadband services.

Further, the utility of certain disclosures, such as those related to network congestion, is also questionable. The Commission opted to forego requiring disclosures related to network performance in the 2015 Order.[152]  The Commission should continue in this manner, as such requirements are even less useful today than they were in 2015. With the availability of speed-test applications, consumers already possess tools to assess the performance of their ISP, casting doubt on the additional value of mandatory congestion disclosures.

IV.    Title II Reclassification Will Present Significant Legal Challenges for the Commission

In the NPRM, the FCC asks whether and how the major questions doctrine (MQD) should inform its conclusions on the text and structure of the Communications Act.[153] With the FCC yet again seeking to reclassify broadband, it is worth noting that, since courts have consistently found the Communications Act is ambiguous as to the proper classification of broadband, there are reasons to doubt whether courts would allow this Title II reclassification as compatible with the MQD.

The MQD, as developed by the Supreme Court, stands for the proposition that agencies will not receive deference while interpreting ambiguous statutory language of “vast economic and political significance.”[154] The MQD requires that Congress give an agency clear congressional authorization to act in such cases. In other words, an ambiguous grant of authority is not enough.

In three recent cases, the Supreme Court has struck down major agency actions due to reliance on ambiguous statutory provisions.

In Ala. Ass’n of Realtors v. Dep’t of Health & Human Servs.,[155] the Court rejected the Centers for Disease Control and Prevention’s (CDC) attempt to impose a moratorium upon residential evictions due to COVID-19. The Court emphasized that “[e]ven if the text were ambiguous, the sheer scope of the CDC’s claimed authority… would counsel against the Government’s interpretation.”[156] Instead, the Court required “Congress to speak clearly when authorizing an agency to exercise powers of ‘vast economic and political significance.’”[157] The Court was concerned that the government’s reading of the statute would give them “a breathtaking amount of authority” with virtually “no limit… beyond the requirement that CDC deem a measure ‘necessary.’”[158]

In NFIB v. Dep’t of Labor,[159] the Court found the Occupational Safety and Health Administration (OSHA) could not pass a vaccine mandate for workplaces. Quoting Realtors, the Court noted that Congress must “speak clearly when authorizing and agency to exercise powers of vast economic and political significance.”[160] Since the vaccine mandate was “a significant encroachment into the lives—and health—of a vast number of employees,” it had vast economic and political significance.[161] Therefore, since the statute did not “plainly authorize[] the Secretary’s mandate,” OSHA’s rule was unlawful.[162] The Court found the MQD was important, because it limited agencies’ ability to “exploit some gap, ambiguity, or doubtful expression in Congress’s statutes to assume responsibilities far beyond its initial assignment.”[163]

In West Virginia v. EPA,[164] the Court considered a rulemaking by the Environmental Protection Agency (EPA) on emission limits for power plants. After reviewing the caselaw back to Brown & Williamson through Gonzalez, UARG, Burwell, Realtors, and NFIB,[165] the Court concluded that there was an “identifiable body of law that has developed over a series of significant cases all addressing a particular and recurring problem: agencies asserting highly consequential power beyond what Congress could reasonably be understood to have granted.”[166] The Court found it was clearly a major question, because the EPA had changed a longstanding practice in how it operated under the statute by expanding its power to “unprecedented” levels through a little-used statutory grant of authority.[167] This is despite the fact the agency had asked Congress for increased authority to do exactly what it decided to do under this provision.[168] Since there was no “clear Congressional authorization” for such a rule, the Court struck it down under the MQD.[169]

In sum, the MQD is now recognized by the Supreme Court as an important limit on agency action. If the statutory authority relied upon by the agency is ambiguous and the agency action is of vast economic and political significance, then courts will find the agency action unlawful on grounds that it exceeds the authority granted by Congress. As the Court put it in NFIB:

Why does the major questions doctrine matter? It ensures that the national government’s power to make the laws that govern us remains where Article I of the Constitution says it belongs—with the people’s elected representatives. If administrative agencies seek to regulate the daily lives and liberties of millions of Americans, the doctrine says, they must at least be able to trace that power to a clear grant of authority from Congress.[170]

Here, reclassification of broadband as a Title II telecommunications service would clearly be an exercise of powers of vast economic and political significance. Broadband providers have invested billions of dollars annually into building out reliable high-speed networks throughout the country, serving hundreds of millions of consumers.[171] On top of that, both federal and state governments have supported this continued buildout through subsidies.[172] The NPRM, which closely mirrors the rules from the 2015 Order, would further affect the expected returns on investment from both broadband providers and policymakers.[173] As then-Judge Brett Kavanaugh put it when considering the 2015 OIO, the “FCC’s net neutrality rule is a major rule for the purposes of The Supreme Court’s major rules doctrine. Indeed, I believe that proposition is indisputable.”[174]

It is worth noting that, much like the agency actions in Realtor and NFIB, the scope of authority claimed by the FCC through reclassification is staggering, allowing the Commission to regulate nearly the entire internet infrastructure through Title II’s expansive regulatory provisions. And as in West Virginia, Congress has considered and rejected net-neutrality legislation that would give the FCC clear authority to impose such rules.

Moreover, the NPRM’s attempt, much like the 2015 Order, to nominally minimize the reach of its claimed authority under Title II through forbearance amounts to rewriting the act to make it more palatable, including by forbearing from rate regulation or network-unbundling requirements. [175]  This is very similar to the attempted “tailoring” by the EPA that the Court rejected in Utility Air Regulatory Group v. EPA.[176]  There, the Tailoring Rule was an attempt to make it such that small entities with the potential to emit greenhouse gasses would not be subject to lawsuits that the act would allow.[177] The Court rejected this attempt to rewrite the statute, concluding that an agency “has no power to ‘tailor’ legislation to bureaucratic policy goals by rewriting unambiguous statutory terms.”[178] Much like the EPA in UARG, the FCC’s “need to rewrite clear provisions of the statute should have alerted” them “that it had taken a wrong interpretive turn.”[179]

Moreover, the ability to forbear under Title II also gives the FCC the ability to stop forbearing once Title II reclassification is made. Thus, the decision to reclassify will have huge economic and political implications, as the public and those regulated will have to pay special attention to the forbearance and possible un-forbearance of the FCC’s decisions going forward.

The concurrence from D.C. Circuit Court of Appeals Judges Sri Srinivasan and David Tatel in US Telecom did not dispute that the rule had vast economic and political significance. The concurrence instead focused on the implications of the Supreme Court’s opinion in National Cable and Telecommn’cs Ass’n v. Brand X Internet Serv., 545 US. 967 (2005).[180] The concurrence concluded essentially that Brand X settled the question by finding the FCC had the authority to make the classification decision.[181]

The problem with this, however, is that the Brand X decision just found that the Communications Act is ambiguous as to whether broadband is a “telecommunications service.”[182] In Brand X, the late Justice Antonin Scalia made the argument in his dissent that the Communications Act defined telecommunications service in a way that unambiguously applied to cable-modem service.[183] If this was the Court’s opinion, then there would be a strong argument that it is settled law that Congress spoke clearly to the issue. But it wasn’t. The majority rejected Justice Scalia’s arguments and found the definition ambiguous. In other words, Brand X did not foreclose a challenge under the MQD.

On the contrary, Brand X, as well as the D.C. Circuit’s decision upholding the 2015 Order[184] and the 2018 Order,[185] all stand for the proposition that the classification of broadband service under the Communications Act is ambiguous. Here, this means that the second part of the MQD, whether Congress clearly spoke to the issue, is a clear no.

To sum up, 1) the MQD is now clearly recognized doctrine by the Supreme Court; 2) the decision to apply Title II to broadband services is a decision of “vast economic and political significance”; and 3) Brand X (and its progeny) stands for the proposition that Congress has not unambiguously spoken to whether broadband service is a telecommunications service under the Communications Act. Therefore, the decision to reclassify broadband service again will likely fail under the MQD.

[1] Notice of Proposed Rulemaking, Safeguarding and Securing the Open Internet, WC Docket No. 23-320 (Sep. 28, 2023) [hereinafter “NPRM”] at ¶ 1.

[2] Brendan Carr, Dissenting Statement of Commissioner Brendan Carr, Safeguarding and Securing the Open Internet, WC Docket No. 23-320, Notice of Proposed Rulemaking (Oct. 19, 2023), available at https://docs.fcc.gov/public/attachments/FCC-23-83A3.pdf (“In other words, utility-style regulation of the Internet was never about improving your online experience—that was just the sheep’s clothing. It was always about government control.”).

[3] 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”].

[4] Id.

[5] Id.

[6] Id. at ¶ 3.

[7] See, e.g., Anna-Maria Kovacs, U.S. Broadband Networks Rise to the Challenge of Surging Traffic During the Pandemic, Georgetown University (Jun. 2020), https://georgetown.app.box.com/s/8e76udzd1ic0pyg42fqsc96r1yzkz1jf. See also European Commission, Digital Solutions During the Pandemic (Sep. 2023), https://commission.europa.eu/strategy-and-policy/coronavirus-response/digital-solutions-during-pandemic_en (“To prevent network congestion and to support the enjoyment of digital services, the?European Commission called upon?telecom operators and users to take action and met with the CEOs of the streaming platforms. The streaming platforms were encouraged to offer standard rather than high-definition content, telecom operators were recommended to adopt mitigating measures for continued traffic, and users were advised to apply settings to reduce data consumption, including the use of Wi-Fi.”)

[8] See Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, § 60506 (2021) (Digital Discrimination) [hereinafter “IIJA”].

[9] See Brendan Carr, supra, note 2 (“Congress has already empowered Executive Branch agencies with national security expertise, including the DOJ, DHS, and Treasury, with the lead when it comes to security issues in the communications sector.”)

[10] See, e.g., 2022 Broadband Capex Report, USTelecom (Sep. 8, 2023), https://ustelecom.org/research/2022-broadband-capex (“America’s broadband industry invested a record $102.4 billion in U.S. communications infrastructure in 2022, reflecting broadband providers’ determination to help achieve the national objective of affordable, reliable high-speed connectivity for all. The annual figure represents a 21-year high for investment from the communications sector and a 19% year-over-year increase.”).

[11] US Telecom v. FCC, 855 F.3d 381, 422 (D.C. Cir. 2016) (Kavanaugh, J., dissenting from denial of rehearing en banc).

[12] Cf. National Cable and Telecommn’cs Ass’n v. Brand X Internet Serv., 545 US. 967 (2005); US Telecom v. FCC, 825 F.3d 674 (D.C. Cir. 2016).; Mozilla Corp v. FCC, 940 F.3d 1 (D.C. Cir. 2019).

[13] NPRM at ¶ 3.

[14] Id. at ¶ 116.

[15] Id. at ¶ 122.

[16] See, for example, Bauner & Espin, infra note 116 (regarding throttling, concluding “incentives for such discrimination are not as strong as feared.”)

[17] NPRM at ¶ 17.

[18] 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.”)

[19] 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.”)

[20] 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.”)

[21] See id. at 59-73.

[22] 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.

[23] Id. (showing household usage of landlines and mobile phones in 2018 at 42.7% and 95%, respectively).

[24] 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.

[25] 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.

[26] See Stephen Breyer, Regulation and Its Reform 195 (1982).

[27] NPRM at ¶ 127.

[28] Id.

[29] Id.

[30] Id.

[31] 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.”).

[32] 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.”).

[33] 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 November 2023, FCC Chair Rosenworcel announced a notice of inquiry seeking input on a proposal to raise the minimum connection-speed benchmark to 100/20 Mbps, with a goal of having a benchmark of 1000/500 Mbps by the year 2030; See also, 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.

[34] See IIJA at § 60102 (a)(1)(A). See also 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.

[35] See IIJA at § 60102(a)(1)(C)(II)(i).

[36] 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.

[37] 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.

[38] FCC, 2019 Broadband Deployment Report, GN Docket No. 18-238, FCC 19-44 (May 29, 2019), at Fig, 4, available at https://docs.fcc.gov/public/attachments/FCC-19-44A1.pdf.

[39] FCC, 2022 Communications Marketplace Report, GN Docket No. 22-203 (Dec. 30, 2022), at Fig. II.A.28, https://docs.fcc.gov/public/attachments/FCC-22-103A1.pdf.

[40] 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”]

[41] 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.

[42] This is qualitatively consistent with the FCC’s finding that United States has the seventh-lowest prices per-gigabit of data consumption. FCC, 2022 Communications Marketplace Report (Appendix G), GN Docket No. 22-103 (Dec. 30, 2022), at 69 (Fig. 41 Fixed Broadband Price Indexes), available at https://docs.fcc.gov/public/attachments/FCC-22-103A5.pdf.

[43] Speedtest, Median Country Speeds Oct. 2023, Speedtest Global Index (last accessed Dec. 11, 2023), https://www.speedtest.net/global-index.

[44] See 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; 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. (May 18, 2023), https://laweconcenter.org/resources/regulatory-myopia-and-the-fair-share-of-network-costs-learning-from-net-neutralitys-mistakes.

[45] Id.

[46] Arthur Menko, 2023 Broadband Pricing Index, Business Planning Inc., (Oct. 2023), available at https://ustelecom.org/wp-content/uploads/2023/10/USTelecom-2023-BPI-Report-final.pdf.

[47] 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.

[48] Speedtest, 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).

[49] 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).

[50] 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.

[51] Id. 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).

[52] NPRM at ¶123 (emphasis added).

[53] See Edward Chamberlin, The Theory of Monopolistic Competition (1933) (arguing that even if a competitor’s service is not a perfect substitute, it can still exert competitive pressure by appealing to different segments of the market with different preferences.). See also William J. Baumol, Contestable Markets: An Uprising in the Theory of Industry Structure, 72 Am. Econ. Rev. (1982) (arguing that even if a new entrant’s product is not a perfect substitute for the incumbent’s product, it can still exert competitive pressure by threatening to enter the market and erode the incumbent’s market share.)

[54] See Dan Heming, Starlink No Longer Has a Waitlist for Standard Service, and 10 MPH Speed Enforcement Update, Mobile Internet Resource Center (Oct. 3, 3023), https://www.rvmobileinternet.com/starlink-no-longer-has-a-waitlist-for-standard-service-and-10-mph-speed-enforcement-update.

[55] See Starlink Specifications, Starlink (last accessed Dec. 12, 2023), https://www.starlink.com/legal/documents/DOC-1400-28829-70.

[56] See Amazon Staff, 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.

[57] See 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.

[58] John Fletcher, The History of US Broadband, S&P Global Market Intelligence (May 23,2023), https://www.spglobal.com/marketintelligence/en/news-insights/research/the-history-of-us-broadband. The report also notes, “While fixed wireless similarly had trouble breaking above 2 million subscribers for years, its recent surge, driven by T-Mobile US Inc. and Verizon, helped it surpass 6 million last year.” Id.

[59] See Andre Boik, The Economics of Universal Service: An Analysis of Entry Subsidies for High Speed Broadband, 40 Info. Econ. & Pol’y 13 (2017).

[60] Gregory Rosston & Scott Wallsten, Should Satellite Broadband Be Included in Universal Service Subsidy Programs?, 6 J. L. & Innovation 135 (2023).

[61] See Drew FitzGerald, After More Than Four Years, Has 5G Lived Up to Expectations?, Wall St. J. (Oct. 14, 2023), https://www.wsj.com/business/telecom/how-5g-changed-world-752b13ee.

[62] See Robert Wyrzykowski, 5G Experience Report, OpenSignal (Jul. 2023), https://www.opensignal.com/reports/2023/07/usa/mobile-network-experience-5g; Petroc Taylor, Average 5G and Overall Download Speed by Provider in the United States in 2023 (in Mbps), Statista (Jul. 11, 2023), https://www.statista.com/statistics/818204/4g-3g-and-overall-download-speed-in-the-united-states-by-provider.

[63] See Robin Layton, Everything You Need to Know About Internet Speeds, AllConnect (Aug. 9, 2023), https://www.allconnect.com/blog/consumers-guide-to-internet-speed.

[64] 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 November 2023, FCC Chair Rosenworcel week announced a notice of inquiry seeking input on a proposal to raise the minimum connection-speed benchmark to 100/20 Mbps, with a goal of having a benchmark of 1000/500 Mbps 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.

[65] Reiner Ludwig, Who Cares About Latency in 5G?, Ericsson Blog (Aug. 16, 2022), https://www.ericsson.com/en/blog/2022/8/who-cares-about-latency-in-5g.

[66] FCC, Measuring Fixed Broadband—Eleventh Report (Dec. 31, 2021), https://www.fcc.gov/reports-research/reports/measuring-broadband-america/measuring-fixed-broadband-eleventh-report.

[67] See, Eli Blumenthal, Verizon’s 5G Speeds Are About to Get Faster, Ahead of Schedule, CNET (Aug. 14, 2023), https://www.cnet.com/tech/mobile/verizons-5g-speeds-are-about-to-get-faster-ahead-of-schedule.

[68] Hal Singer & Augustus Urschel, Competitive Effects of Fixed Wireless Access on Wireline Broadband Technologies, Econ One (Jun. 2023), available at https://api.ctia.org/wp-content/uploads/2023/06/Competitive-Effects-of-Fixed-Wireless-Access-on-Wireline-Broadband-Technologies-FINAL.pdf.

[69] NPRM at ¶129.

[70] This section is adapted from Geoffrey A. Manne, Kristian Stout & Ben Sperry, A Dynamic Analysis of Broadband Competition: What Concentration Numbers Fail to Capture, at 26-30, Int. Ctr. for L. & Econ. (Jun. 3, 2021), available at https://laweconcenter.org/wp-content/uploads/2021/06/A-Dynamic-Analysis-of-Broadband-Competition.pdf.

[71] See J. Gregory Sidak & David J. Teece, Dynamic Competition in Antitrust Law, 5 J. Competition L. & Econ. 581, 614 (2009).

[72] C.f. id. at 585 (“Indeed, it is common to find a debate about innovation policy among economists collapsing into a rather narrow discussion of the relative virtues of competition and monopoly, as if they were the main determinants of innovation. Clearly, much more is at work.”).

[73] Harold Demsetz, Why Regulate Utilities?, 11 J. L. & Econ. 55, 55 (1968).

[74] See id.

[75] See Sidak & Teece, Dynamic Competition, supra note 71.

[76] See, e.g., Thomas M. Jorde & David J. Teece, Competing Through Innovation: Implications for Market Definition, 64 Chi.-Kent L. Rev. 741, 742 (1988) (“Moreover, in markets characterized by rapid technological progress, competition often takes place on the basis of performance features and not price.”); David S. Evans & Richard Schmalensee, Some Economic Aspects of Antitrust Analysis in Dynamically Competitive Industries, in 2 Innovation Policy and The Economy 1, 3 (Adam B. Jaffe, et al., eds. 2002) (“The defining feature of new-economy industries is a competitive process dominated by efforts to create intellectual property through R&D, which often results in rapid and disruptive technological change.”).

[77] See generally William J. Baumol, John C. Panzar & Robert D. Willig, Contestable Markets and the Theory of Industry Structure (1982).

[78] Sidak & Teece, Dynamic Competition, supra note 71, at 585, 604.

[79] For a discussion of this principle and how it applies to broadband markets, see T. Randolph Beard, George S. Ford, Lawrence J. Spiwak, & Michael Stern, The Law and Economics of Municipal Broadband, 73 Fed. Comm’cns L.J. 1 (2020) [hereinafter, “Beard, Ford, Spiwak & Stern”].

[80] See Rabah Amir, Market Structure, Scale Economies and Industry Performance, CORE Discussion Paper No. 2003/65 (Sep. 1, 2003), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=995721.

[81] See Demsetz, Why Regulate Utilities?, supra note 73; see also Sharat Ganapati, Growing Oligopolies, Prices, Output, and Productivity, Census Working Paper CES-WP-18-48 (Jan. 20, 2020), available at https://www.sganapati.com/files/Ganapati_2019_OligopoliesPricesQuantities_AEJmicro.pdf (noting that increased concentration results from a beneficial growth in firm size in productive industries that “expand real output and hold down prices, raising consumer welfare, while maintaining or reducing their workforces, lowering labor’s share of output.”)

[82] See generally J. Gregory Sidak & David J. Teece, Innovation Spillovers and The “Dirt Road” Fallacy: The Intellectual Bankruptcy of Banning Optional Transactions for Enhanced Delivery Over the Internet, 6 J. Comp. L. Econ. 521, 540 (2010) (Discussing the broad array of factors that must be taken into account in a dynamic analysis of the Internet and broadband service).

[83] Michelle Connolly & James E. Prieger, A Basic Analysis of Entry and Exit in the US Broadband Market, 2005-2008, Pepperdine University School of Public Policy Working Paper No. 42 (2013) at 4, https://digitalcommons.pepperdine.edu/sppworkingpapers/42 (published as Michelle Connolly & James E. Prieger, A Basic Analysis of Entry and Exit in the US Broadband Market, 2005-2008, 12 Rev. Network Econ. 229 (2013)).

[84] See generally Nicolai J. Foss & Peter G. Klein, Organizing Entrepreneurial Judgment (2012).

[85] See, e.g., Sidak & Teece, Dynamic Competition, supra note 71, at 615.

[86] Menko, supra note 46.

[87] See Daniel A. Lyons, Innovations in Mobile Broadband Pricing 3-4, Mercatus Center Working Paper No. 14-08 (Mar. 2014), available at https://www.mercatus.org/research/working-papers/innovations-mobile-broadband-pricing.

[88] Id.

[89] AT&T, Sponsored Data from AT&T (last accessed Dec. 12, 2023), https://www.att.com/att/sponsoreddata/en.

[90] T-Mobile, Unlimited Video Streaming with Binge On (last accessed Dec. 12, 2023), https://www.t-mobile.com/tv-streaming/binge-on.

[91] J. Gregory Sidak & David J. Teece, supra, note 82, at 532-33.

[92] See infra Section III.A.

[93] See, e.g., Herbert Hovenkamp, The Rule of Reason, 70 Fla. L. R. 81 (2018) (“Vertical restraints should be found unlawful only when they facilitate an output reduction that serves to increase prices in relation to costs. To that extent, every anticompetitive vertical restrain must contain at least an implicit horizontal element, whether it be collusion or exclusion. The vast majority of purely vertical agreements pose no such threat. These conclusions are largely borne out by the case law. Once the rule of reason is applied to a vertical practice, few instances of it are condemned.”)

[94] NPRM at ¶ 56.

[95] Id.

[96] Id.

[97] ICLE, Comments on Refreshing the Record in Restoring Internet Freedom and Lifeline Proceedings in Light of the D.C. Circuit’s Mozilla Decision, WC Docket Nos. 17-108, 17-287, 11-42 (Apr. 20, 2020), at 9, available at https://laweconcenter.org/wp-content/uploads/2020/04/icle_rifo_record_refresh_comments_final-20200420.pdf (“But the widely different regulatory philosophies underlying the Orders—that of the RIFO’s light-touch regulation under Title I compared to the OIO’s more interventionist regulation based on the uncertain whims of a changing political environment under Title II—strongly suggests different levels of regulatory certainty. And it is virtually inevitable that the greater regime uncertainty under Title II would contribute to a reduction in investment and/or its less efficient and effectively deployment. Such an effect is likely more attenuated than the acute, immediate response many seem to be looking for. But it may be no less real and no less important.”)

[98] Brendan Carr, Dissenting Statement of Commissioner Brendan Carr, 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 (Nov. 15, 2023), https://docs.fcc.gov/public/attachments/FCC-23-100A3.pdf (Regarding digital discrimination rules, “The FCC reserves the right under this plan to regulate both ‘actions and omissions, whether recurring or a single instance.’ In other words, if you take any action, you may be liable, and if you do nothing, you may be liable. There is no path to complying with this standardless regime.”)

[99] See Edwin J. Elton & Martin J. Gruber, Modern Portfolio Theory and Investment Analysis (4^th ed, 1991).

[100] Wolfgang Briglauer, Carlo Cambini, Klaus Gugler, & Volker Stocker, Net Neutrality and High-Speed Broadband Networks: Evidence from OECD Countries, 55 Eur. J. Law Econ. 533–571 (2023).

[101] 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).

[102] NPRM at ¶ 56.

[103] NPRM at ¶ 157.

[104] FCC, Fact Sheet: FCC Chairwoman Rosenworcel Proposes to Restore Net Neutrality Rules (Sep. 26, 2023), available at https://docs.fcc.gov/public/attachments/DOC-397235A1.pdf.

[105] Rich Greenfield, Adding “Fast Lanes” Does Not Require Harming the Internet, Vox (May 14, 2014), https://www.vox.com/2014/5/14/11626812/adding-fast-lanes-does-not-require-harming-the-internet.

[106] Id.

[107] Catie Keck, A Look Under the Hood of the Most Successful Streaming Service on the Planet, The Verge (Nov. 17, 2021), https://www.theverge.com/22787426/netflix-cdn-open-connect.

[108] ICLE Comments., supra note 97 at 3-8. See also J. Gregory Sidak & David J. Teece, supra, note 82 at 533 (“Superior [quality of service] is a form of product differentiation, and it therefore increases welfare by increasing the production choices available to content and applications providers and the consumption choices available to end users. Finally, as in other two-sided platforms, optional business-to-business transactions for [quality of service] will allow broadband network operators to reduce subscription prices for broadband end users, promoting broadband adoption by end users, which will increase the value of the platform for all users.”).

[109] Axel Gautier & Robert Somogyi, Prioritization vs Zero-Rating: Discrimination on the Internet, 73 Int’l. J Ind. Org. 102662 (Dec. 2020).

[110] NPRM at ¶ 153.

[111] Id.

[112] Id. at ¶ 155.

[113] See Nilay Patel, Taylor Swift Fans Used Record Amounts of Data during the Eras Tour in North America, The Verge (Nov. 16, 2023), https://www.theverge.com/2023/11/16/23949041/taylor-swift-eras-tour-mobile-data-usage-att.

[114] Sandvine, Sandvine’s 2023 Global Internet Phenomena Report Shows 24% Jump in Video Traffic, with Netflix Volume Overtaking YouTube (Jan. 17, 2023), https://www.prnewswire.com/news-releases/sandvines-2023-global-internet-phenomena-report-shows-24-jump-in-video-traffic-with-netflix-volume-overtaking-youtube-301723445.html.

[115] Daeho Lee & Junseok Hwang, Network Neutrality and Difference in Efficiency Among Internet Application Service Providers: A Meta-Frontier Analysis, 35 Telecomm. Pol’y 764 (2011).

[116] Fangfan Li, Arian Akhavan Niaki, David Choffnes, Phillipa Gill, & Alan Mislove. A Large-Scale Analysis of Deployed Traffic Differentiation Practices, Association for Computing Machinery, Proceedings of the ACM Special Interest Group on Data Communication, SIGCOMM ’19 (2019), https://dl.acm.org/doi/pdf/10.1145/3341302.3342092.

[117] Christoph Bauner & Augusto Espin, Do Subscribers of Mobile Networks Care About Data Throttling?, 47 Telecom. Pol’y 102665 (Nov. 2023).

[118] Id. (“[U]sers may actually benefit from a modest degree of throttling as this preserves bandwidth and thus aides network stability and reliability. In other words, even if users get harmed by the direct effect of throttling (slower data transmission), the positive indirect effect (more reliable network) may outweigh this issue, so that users may prefer the throttled network. If this is the case, it would pose an additional argument against net neutrality regulation.”)

[119] Id.

[120] 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).

[121] Johnny Kampis, Johnny Kampis: FCC Push To Eliminate Data Caps Could Increase Broadband Rates For Many Users, Broadband Breakfast (Sep. 28, 2023), https://broadbandbreakfast.com/2023/09/johnny-kampis-fcc-push-to-eliminate-data-caps-could-increase-broadband-rates-for-many-users.

[122] Peter Christiansen, Survey Finds Nearly Half of America Unaware of Internet Data Cap Limits, HighSpeedInternet.com (Feb. 25, 2021), https://www.highspeedinternet.com/resources/data-caps-survey.

[123] See Working Group on Economic Impacts of Open Internet Frameworks, Policy Issues in Data Caps and Usage-Based Pricing, Open Internet Advisory Committee (Jul. 9, 2013), available at https://transition.fcc.gov/cgb/oiac/Economic-Impacts.pdf.

[124] See id. at 14-16.

[125] 2015 Order at ¶¶ 151-153.

[126] Id.

[127] Guz Hurwitz, The Not Neutrality of Tech Reporting: Discussing the Economics of Lifting Data Caps During a Stay-at-Home Crisis, Truth on the Market (Mar. 20, 2020), https://truthonthemarket.com/2020/03/20/the-not-neutrality-of-tech-reporting-discussing-the-economics-of-lifting-data-caps-during-a-stay-at-home-crisis.

[128] 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 (2017).

[129] See Scott Jordan, A Critical Survey of the Literature on Broadband Data Caps, 41 Telecomm. Pol’y 813 (2017).

[130] NPRM at ¶ 137.

[131] 2015 Order at ¶¶ 78-101; see also In the Matter of Protecting & Promoting the Open Internet, Dissenting Statement of Commissioner Michael O’Rielly, 30 F.C.C. Rcd. 5601, 5987 (2015) (“Even after enduring three weeks of spin, it is hard for me to believe that the Commission is establishing an entire Title II/net neutrality regime to protect against hypothetical harms. There is not a shred of evidence that any aspect of this structure is necessary. The D.C. Circuit called the prior, scaled-down version a “prophylactic” approach. I call it guilt by imagination.”).

[132] 2018 Order at ¶¶ 109-139.

[133] 2018 Order at ¶ 143.

[134] Stephen G. Breyer, Antitrust, Deregulation, and the Newly Liberated Marketplace, 75 Cal. L. Rev. 1005, 1007 (1987).

[135] Id.

[136] 2018 Order at ¶ 123. See also Joshua D. Wright & Thomas W. Hazlett, The Effect of Regulation on Broadband Markets: Evaluating the Empirical Evidence in the FCC’s 2015 “Open Internet” Order, 50 Rev. Indus. Org. 487, 489 (2017) (Network neutrality rules address conduct that “[i]f undertaken for anti-competitive purpose and achieving anti-competitive effect, [] would be deemed vertical foreclosure in economics (or under antitrust law).”). See also 2015 Order at ¶ 79 & note 123 (discussing past instances of alleged ISP misconduct that amounted to “limit[ations on] openness,” all of which were cognizable under the antitrust laws).

[137] 2015 Order at ¶ 63.

[138] Id. at ¶ 64.

[139] Id. at  ¶ 275.

[140] Id. at ¶ 140.

[141] See Patrick Rey & Jean Tirole, A Primer on Foreclosure, in III Handbook of Indus. Org. 2145 (Mark Armstrong & Rob Porter eds., 2007).

[142] NPRM at ¶ 23.

[143] See Rey & Tirole, A Primer on Foreclosure, supra note 140.

[144] See Francine Lafontaine & Margaret Slade, Vertical Integration and Firm Boundaries: The Evidence, 45 J. Econ. Lit. 629 (2007) (documenting the economic evidence showing that such vertical relationships are more likely to be competitively beneficial or benign than to raise serious threats of foreclosure).

[145] See Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 886-87 (2007) (holding that the per se rule should be applied “only after courts have had considerable experience with the type of restraint at issue” and “only if courts can predict with confidence that [the restraint] would be invalidated in all or almost all instances under the rule of reason” because it “‘lack[s] . . . any redeeming virtue.’” (citation omitted)).

[146] See D. Daniel Sokol, The Transformation of Vertical Restraints: Per Se Illegality, the Rule of Reason, and Per Se Legality, 79 Antitrust L.J. 1003, 1004 (2014) (“[T]he shift in the antitrust rules applied to [vertical restraints] has not been from per se illegality to the rule of reason, but has been a more dramatic shift from per se illegality to presumptive legality under the rule of reason”).

[147] NPRM at ¶ 136 (“The Commission’s transparency rule requires ISPs to publicly disclose the network practices, performance characteristics, and commercial terms of the BIAS they offer, including disclosure of any blocking, throttling, and affiliated or paid prioritization practices.”).

[148] See, e.g. Geoffrey A. Manne, The Hydraulic Theory of Disclosure Regulation and Other Costs of Disclosure, 58 Ala. L. Rev. 473 (2007).

[149] NPRM at ¶¶ 172-175.

[150] 47 U.S.C. § 201(b).

[151] 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.

[152] NPRM at ¶ 175.

[153] See NPRM at ¶¶ 80-83.

[154] King v. Burwell, 576 U.S. 473, 486 (2015) (quoting Utility Air Regulatory Group v. EPA, 573 U.S. 302, 324 (2014)).

[155] 141 S. Ct. 2485 (2021).

[156] Id. at 2489.

[157] Id.

[158] Id.

[159] 142 S. Ct. 661 (2022).

[160] Id. at 665.

[161] Id.

[162] Id.

[163] Id. at 669.

[164] 142 S. Ct. 2587 (2022).

[165] See id. at 2607-09.

[166] Id. at 2609.

[167] See id. at 2612.

[168] See id. at 2614.

[169] See id. at 2615-17.

[170] NFIB, 142 S. Ct. at 668.

[171] See, e.g., 2022 Broadband Capex Report, USTelecom (Sep. 8, 2023), https://ustelecom.org/research/2022-broadband-capex (“America’s broadband industry invested a record $102.4 billion in U.S. communications infrastructure in 2022, reflecting broadband providers’ determination to help achieve the national objective of affordable, reliable high-speed connectivity for all. The annual figure represents a 21-year high for investment from the communications sector and a 19% year-over-year increase.”).

[172] See NPRM at ¶ 1 (“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.”); 47 U.S.C. § 1701(1) (“[A]ccess to affordable, reliable, high-speed broadband is essential to full participation in modern life in the United States.”). See also 47 U.S.C. §§ 1722(1)(A)-(B) (“[A] broadband connection and digital literacy are increasingly critical to how individuals (A) participate in society, economy and civic institutions of the United States;” and “(B) access health care and essential services, obtain education, and build careers.”)

[173] See supra Part II.C.

[174] US Telecom v. FCC, 855 F.3d 381, 422 (D.C. Cir. 2016) (Kavanaugh, J., dissenting from denial of rehearing en banc).

[175] See NPRM at ¶¶ 103-113. See also FCC Fact Sheet, Safeguarding and Securing the Open Internet (Sept. 28, 2023) (“Propose to forbear from 26 Title II provisions, and clarify that the Commission will not regulate rates or require network unbundling.”).

[176] 573 US. 302, 328 (2014) (“We reaffirm the core administrative-law principle that an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate.”).

[177] See id. at 326 (“The Tailoring Rule is not just an announcement of EPA’s refusal to enforce the statutory permitting requirements; it purports to alter those requirements and to establish with the force of law that otherwise-prohibited conduct will not violate the Act. This alteration of the statutory requirements was crucial to EPA’s “tailoring” efforts. Without it, small entities with the potential to emit greenhouse gases in amounts exceeding the statutory thresholds would have remained subject to citizen suits—authorized by the Act.”).

[178] Id. at 325.

[179] Id. at 328.

[180] See US Telecom, 855 F.3d at 383-85 (Srinivasan, J. & Tatel, J., concurring in denial from rehearing en banc).

[181] See id. at 385 (“In Brand X, the Supreme Court definitively — and authoritatively, for our purposes as an inferior court — answered that question yes.”).

[182] See Brand X, 545 U.S. at 989 (“[T]he statute fails unambiguously to classify the telecommunications component of cable modem service as a distinct offering.”).

[183] See id. at 1005-14 (Scalia, J., dissenting).

[184] See US Telecom v. FCC, 825 F.3d 674 (D.C. Cir. 2016).

[185] See Mozilla Corp v. FCC, 940 F.3d 1 (D.C. Cir. 2019).

Summary

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 (“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.

II.      The Commission Fails to Offer Sufficient Justifications for a Change in Policy

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]

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:

1. Increased use and importance of broadband internet during and after the COVID-19 pandemic;[10]
2. Federal spending on provider investments and consumer subsidies;[11]
3. Safeguarding national security[12] and preserving public safety;[13] and
4. The need for a uniform national regulatory system.[14]

As we discuss below, these justifications do not stand up to scrutiny.

A.      Increased Importance of Broadband Internet During the COVID-19 Pandemic

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.

B.      Recent Federal Spending on Broadband Deployment Undermines the Case for Title II

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]

• Coronavirus Aid, Relief, and Economic Security (CARES) Act, Pub. L. No. 116-136, 134 Stat. 281 (2020) (appropriating $200 million to the Commission for telehealth support through the COVID-19 Telehealth Program);
• Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, § 903, 134 Stat. 1182, (2020) (appropriating an additional $249.95 million in additional funding for the Commission’s COVID-19 Telehealth Program) and § 904, 134 Stat. 2129 (establishing an Emergency Broadband Connectivity Fund of $3.2 billion for the Commission to establish the Emergency Broadband Benefit Program to support broadband services and devices in low-income households during the COVID-19 pandemic);
• American Rescue Plan Act of 2021, Pub. L. No. 117-2, § 7402, 135 Stat. 4 (2021) (establishing a $7.171 billion Emergency Connectivity Fund to help schools and libraries provide devices and connectivity to students, school staff, and library patrons during the COVID-19 pandemic);
• Infrastructure Act, § 60102 (establishing grants for broadband-deployment programs, as administered by NTIA); § 60401 (establishing grants for middle mile infrastructure); and § 60502 (providing $14.2 billion to establish the Affordable Connectivity Program).

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.

C.      There Have Been No New Developments in National Security or Safety to Support Reclassification

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]

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]

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.

D.     The Commission Must Work to Establish a National Standard for Broadband Regulation

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.

III.    Title II Will Commoditize Broadband Services and Stifle Innovation

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]

1. A 2005 consent decree by DSL-service provider Madison River requiring it to discontinue its practice of blocking Voice over Internet Protocol (VoIP) telephone calls.[60] At the time, Madison River had fewer than 40,000 DSL subscribers.[61]
2. A 2008 order against Comcast for interfering with peer-to-peer file sharing.[62] Comcast claimed intensive file-sharing traffic was causing such severe latency and jitter that it made VoIP telephony unusable.[63]
3. A study published in 2019, using data mostly from 2018, that “suggested that ISPs regularly throttle video content.”[64] Several commenters note that this study has been “debunked.”[65] We note in our comments that the study found that, whatever throttling ISPs engaged in, the authors concluded it was “not to the extent in which consumers would likely notice.”[66]
4. In 2021, a small ISP in northern Idaho planned to block customer access to Twitter and Facebook; responding to public pressure, the provider backtracked on the policy.[67]

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.

A.      Economic Logic and the Economic Literature Support Non-Neutral Networks[75]

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]

1.        Economic literature

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]

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]

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.

B.      Paid Prioritization

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.

1.        Paid prioritization is a necessary feature of providing internet service

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.

2.        The record reflects that the Commission should not ban paid prioritization

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.”

C.      Blocking

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.

D.     Throttling

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]

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.

IV.    General Conduct Standard[133]

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.

V.      Data Caps and Usage-Based Pricing

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.

A.      Nonlinear Pricing Models Are Pro-Consumer

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.

B.      The Record Reflects that the Commission Should Not Interfere with Usage-Based Pricing

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.

[88] Id.

[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.

[148] Id.

[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.

We thank the Federal Communications Commission for this opportunity to comment on the rules proposed in the above-captioned Notice of Proposed Rulemaking.[1] We are both legal academics with long-standing interest in the topics addressed by these proposed rules. Over the past 15 years, we have each published numerous articles, books, and other scholarly works on network neutrality and related topics, submitted comments in relevant Commission proceedings and briefs in related judicial proceedings, and been active participants in academic and public discussion of these topics.[2]

The views presented below are ours alone and should not be attributed to our employer or to the Center for Technology, Innovation, and Competition. Neither of us has received any compensation for these comments, nor has either of us been retained by any party with a financial interest in these proceedings.

The essence of the rules – their purpose and flaws – are effectively captured in the first paragraphs of the NPRM:

1. Today we propose to reestablish the Federal Communications Commission’s (Commission) authority over broadband Internet access service by classifying it as a telecommunications service under Title II of the Communications Act of 1934, as amended (Act). 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. 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.
2. But even as our society has reconfigured itself to do so much online, our institutions have fallen behind. There is currently no expert agency ensuring that the Internet is fast, open, and fair. Since the birth of the modern Internet in the 1990s, the Commission had played that role, but the Commission abdicated that responsibility in 2018, just as the Internet was becoming more vital than ever.

While the NPRM would establish various specific rules (e.g., the proposed conduct rules and transparency rule) and puts forth various justifications for them, the primary and most significant goal of the proposal is to classify Broadband Internet Access Service (BIAS) as a Title II telecommunications service. That is literally the first sentence of the NPRM.

This purpose is also the most objectionable and least necessary aspect of the proposed rules. Also as noted in the first paragraph, and discussed in the NPRM, the COVID-19 pandemic made more clear than ever the importance of the Internet to modern life. But unrecognized by the NPRM, this period also demonstrated the extent to which the pervasive regulation contemplated by Title II is unnecessary for the Internet to satisfy this important role. While stressed, and while benefitting from support from programs like the Emergency Broadband Benefit,[3] American Rescue Plan Act,[4] and Affordable Connectivity Program,[5] the Internet proved its importance throughout the pandemic largely by living up to the tasks to which it was unexpectedly put. A lack of Open Internet regulations did not prevent it from doing so.

The first paragraph also recognizes Congress’s investment of $65 billion to support broadband deployment in response to the pandemic.[6] In so doing, Congress tasked an agency other than the Commission, the National Telecommunications and Information Agency (NTIA), with primary responsibility for overseeing use of this funding through the Broadband Equity, Access, and Deployment (BEAD) program.[7] And Congress did not include any network neutrality or open Internet provisions as requirements for allocation of this funding. This calls into substantial question whether Congress views the Commission as the regulatory agency with regulatory authority as relates to the Internet and, especially, whether Congress views rules such as proposed in the NPRM as necessary.

Even to the extent that it is true that the Commission is a relevant expert agency, the assertions in the second paragraph of the NPRM are false. The Federal Trade Commission (FTC) has expertise in antitrust and consumer protection. To the extent that Internet Service Providers (ISP) commit to providing fast, open, and fair service to their users—promises routinely made—there is, in fact, an agency with relevant expertise to ensure those commitments are kept. And to the extent that an ISP does not make such commitments, the First Amendment limits the FCC’s ability to impose them upon the ISP through the proposed rules. And to the extent that the FCC has played that role “since the birth of the modern Internet in the 1990s,” Title II classification has only been the basis for that role for the brief period between adoption of the 2015 Open Internet Order and its recission in the 2018 Restoring Internet Freedom Order.

The Commission is needlessly steering into political controversy through Title II reclassification. The D.C. Circuit’s 2014 opinion in Verizon makes clear that implementation of the substantive rules proposed in the NPRM could be accomplished using the Commission’s Title I authority.[8] There would likely be widespread support for (or at least acceptance of) rules adopted on this basis, both political and from industry.

This concern is heightened by the current judicial landscape. The Supreme Court’s evolving Major Questions Doctrine jurisprudence casts significant doubt on the Commission’s ability to assert long-disclaimed pervasive regulatory authority over Internet services—services that the Commission has repeatedly referred to as of substantial economic and political significance.[9] This is heightened by the changing technology of Internet access, which calls into doubt the ongoing relevance of the analysis in Brand X[10], the most important precedent supporting Title II classification of BIAS.[11] And the Supreme Court is hearing this term cases that bear directly on First Amendment central to the proposed rules.[12] The proposed rules significantly implicate speech regulation and are therefore highly sensitive to changing First Amendment jurisprudence. Proposing rules prior to resolution of these ongoing cases creates a needles risk of uncertainty over the coming years—a risk that directly contradicts the importance that the Commission ascribes to the proposed rules.

The remainder of these comments further develop these concerns in four sections. Part I discusses how technological developments over the past twenty years raise doubt about the continued application of the conclusions in Brand X. Part II looks at the current state of the broadband Internet services industry, focusing on the BEAD Program. Part III looks at First Amendment considerations relating to the NPRM. And Part IV considers the Supreme Court’s recent Major Questions Doctrine jurisprudence.

I. Changes in BIAS Architecture Cast Doubt on Continued Relevance of Brand X

The most important precedent governing classification of BIAS as a Title I information service or Title II telecommunication service is the Supreme Court’s opinion in Brand X. The question in Brand X was, in a sense, the opposite of that presented by the NPRM.

Both involve the classification of broadband Internet service as either an “information service” (regulated under Title I of the Communications Act) or a “telecommunications service” (regulated under Title II of the Communications Act). These terms are defined in 47 U.S.C. 153:

(20) INFORMATION SERVICE.—The term “information service” means the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service.

(43) TELECOMMUNICATIONS.—The term “telecommunications” means the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received.

(46) TELECOMMUNICATIONS SERVICE.—The term “telecommunications service” means the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.

In Brand X, the Court recognized that some portion of the Internet service offered by a cable ISP is a telecommunications service and that some other portion is an information service.[13] The question the Court faced was whether those were so tightly integrated that the entire offering could be classified as a single information service offering, as opposed to separate and distinct telecommunications and information service offerings.[14]

In the proposed rules, the Commission proposes to do the exact opposite: they would classify an offering that includes some amount of information services alongside a telecommunications service as an integrated telecommunications service. While it seems natural to characterize these as obverse sides of a coin, the statutory reality does not allow this approach. The definition of an “information service” is the offering of various capabilities “via telecommunications”—information services are, in other words, necessarily integrated with a telecommunications service. The definition of “telecommunications service,” on the other hand, includes exclusively the provision of telecommunications. Any blending of these services can only be an information service.

If the Commission is to classify BIAS as a Title II telecommunications service, such classification must apply solely to the portion of an ISP’s service that is not an information service. If, in other words, Domain Name System (DNS) services are information services, offering consumers a service that includes DNS access must necessarily fall outside of the scope of BIAS offerings classified as Title II services. The same applies for any other services offered by an ISP that are necessarily information services.

As noted in the NPRM, a similar argument was rejected by the D.C. Circuit Court of Appeals in its affirmation of the 2015 Open Internet Order’s classification of BIAS as a Title II service.[15] There, a two-judge majority accepted the Commission’s characterization of DNS service as relating to the “management, control, or operation of a telecommunications system or the management of a telecommunications service,” features which remove the service from the statutory definition of an information service.[16] Dissenting, Judge Williams would have rejected that argument as arbitrary and capricious.[17]

Even accepting the Commission’s argument, this approach turns the question into a technical one. Judge Williams notes that with this approach “the Commission set for itself a highly technical task of classification”[18]—an echo of the Supreme Court’s statement in Brand X that the question of whether transmission services and DNS service are functionally integrated “turns not on the language of the Act, but on the factual particulars of how Internet technology works and how it is provided.”[19]

The question of whether DNS service is a management, control, or operation function was briefly discussed in Brand X, as well—though it was not properly before or decided by the Court. Rather, it was raised by Justice Scalia in his dissent, to which the majority responded in its footnote 3. In his dissent, Justice Scalia characterizes DNS service as “scarcely more than routing information, which is expressly excluded from the definition of ‘information service.’”[20] In its footnote, the majority notes that “routing information” is not, in fact, among the functions excluded from the definition of an information service.[21] Of course, ISPs do offer routing services. They do not merely transmit information of the user’s choosing between or among points specified by the user without change in the form or content sent or received—they very often select for the user which endpoints to which the user’s information will be sent or from which it will be retrieved and the routes by which that information will be sent and received. And this is very often accomplished using DNS configurations.[22]

This is significantly more true today than it was at the time of the DC Circuit’s review of the 2015 Open Internet Order, and even more so true than it was at the time of the Brand X case. The highly technical nature of the Internet, including the features provided by some, but not all, ISPs, has changed dramatically since the 2015 Open Internet Order—and it continues to change. Some ISPs are working to deploy technologies like the Internet Engineering Task Force’s proposed Non-Queue-Building Per-Hop Behavior standard to improve DNS performance.[23] Some ISPs are working to support development of new active queue management technologies, such as the Internet Engineering Task Force’s proposed Low Latency, Low Loss, Scalable Throughput standard, which, again, have the potential to dramatically improve performance of Internet services.[24] Larger ISPs can implement dynamic routing across their networks to improve performance.[25] These are all service that some, but not all, ISPs are likely to implement to offer than enhance users’ ability to acquire, retrieve, use, or make available information—and in their improved forms none is necessary to the management or operation of the underlying telecommunications service.

Similarly, the necessity of DNS services provided by ISPs has only decreased in recent years. Today there are several free, open DNS services, including services provided by Google and Cloudflare. Statistics suggest that at least 20% of Internet users use these services instead of DNS services provided by their ISP.[26] There are parts of the world in which such services account for more than 50% of the market, demonstrating the extent to which such services are not necessary to the management or operation of the underlying telecommunications system.[27] Private VPN services are widely advertised and obviate the need for an ISP’s DNS services. Web browsers such as Chrome and Firefox include support for DNS over HTTPS, including their own DNS server settings—indeed, by default Firefox bypasses the ISPs’ DNS servers entirely.[28]

Together, these demonstrate the extent to which even a mundane-seeming service like DNS is more than a mere network management feature. While Justice Scalia’s argument in Brand X that DNS is not an information service might have been reasonable at the time, with each passing year that argument becomes weaker. Today, DNS is a standalone service, undergoing active research and development, offered in a competitive marketplace. Consumers can, and do, bypass their ISPs’ DNS services; standalone products like web browsers and VPN services can, and do, bypass their users’ ISPs. And ISPs invest in improving the quality of their own DNS services not because it improves their management of the service—marginal increases in DNS performance offer zero benefit to the management, control, or operation of a telecommunications system—but because it enhances the users’ ability to generate, acquire, store, transform, process, retrieve, utilize, or make available information via telecommunications.

II. Ongoing Development of the Broadband Industry, Notably Including Congressional Broadband Programs, Cast Doubt on the Proposed Rules

The NPRM expresses concern that ISPs “have the incentive and ability to engage in practices that pose a threat to Internet openness” and seeks comment on the state of competition in the market.[29] Contrary to the NPRM’s concerns, the state of competition in the BIAS market is robust and continues to increase. While the NPRM cites to 2021 data that that approximately 36 percent of households do not have access to two or more providers offering 100/20 Mbps wireline Internet service, that same data shows that more than 86 percent of households do have competitive options at the 25/3 Mbps level—even where a customer may only have a single ISP offering 100/20 Mbps speeds, almost all of those customers have at least one other option that creates competitive pressure.[30]

But the NPRM’s cited data is subject to greater criticism on other fronts. First, it cites to service availability data from 2021—a period during which ISPs were rapidly expanding their capacity to accommodate pandemic-era demands. The rate of this expansion was supplement by tens of billions of dollars of funding was made available through the American Rescue Plan Act (ARPA) to support broadband infrastructure investment, none of which is included in the cited data.[31] This data also doesn’t consider satellite options—Space X’s Starlink is now widely available throughout the United States[32] and Amazon’s Kupier project is beginning to put satellites into orbit.[33] And it excludes consideration of fixed wireless services, including both those commonly offered by WISPs and new 5G fixed wireless services offered by traditional wireless companies like T-Mobile and Verizon. The exclusion of fixed wireless services is notable given the pace at which consumers are embracing the technology as an alternative to traditional wireline service options.[34]

And, of course, the numbers cited by the NPRM exclude future broadband availability that will be facilitated by the Broadband Equity Access and Deployment (BEAD) program, which will increase broadband availability in currently un- and underserved areas.

The BEAD program draws attention to another concern about the proposed rules: over the past several years Congress has enacted numerous laws that support broadband investment but has not included net neutrality or open internet considerations in any of them. As will be discussed in the final section of these comments, the ultimate question for any federal agency action is whether it is authorized by Congress. The concept of net neutrality has been debated in Congress for more than a decade—it not conceivable that Congress was not aware of concerns such as those animating this NPRM as it developed the BEAD program. An inference can therefore be drawn from the fact that Congress, in allocating tens of billions of dollars in support for broadband investment, did not think it necessary to include provisions relating to network neutrality, even though doing so would settle a debate that has spanned four presidential administrations and produced substantial uncertainty within industry.

Indeed, a related inference might be drawn from Congress’s decision to entrust the National Telecommunications and Infrastructure Agency to oversee the BEAD program’s more-than $42 billion budget.[35] The BEAD program has many similarities to the Commission’s longstanding universal service programs, including raising many issues about which one would ordinarily assume the Commission as—and is viewed by Congress as having—substantial expertise. That Congress turned to another agency for the implementation of the largest broadband infrastructure program in the nation’s history should provide guidance on how broadly to interpret the Commission’s authority under the Communications Act to implement related program such as those proposed in the NPRM.[36]

III. First Amendment Considerations Cast Doubt on the Proposed Rules

The proposed rules raise at least three sets of concerns under the First Amendment. First, whether imposition of common carriage obligations is problematic under First Amendment principles. Second, whether the specific proposed rules are problematic under First Amendment principles, even absent reclassification. And third, the relevance of cases currently pending before the Supreme Court to the proposed rules.

The last of these concerns can be addressed with brevity: NetChoice v. Paxton is currently pending before the Supreme Court, with an opinion expected this term.[37] This case asks the Court to consider whether laws that limit social media platforms’ content-moderation practices, imposing common-carriage-like obligations upon them, comply with the First Amendment. The laws that the Court is reviewing bear similarity to the rules proposed by the Commission and there is a high likelihood that the Court’s decision with have significant bearing on these proposed rules. It would be imprudent to adopt any rules on this topic until the Supreme Court issues its opinion in NetChoice.

The NetChoice case also illustrates the next point to consider: whether imposition of common carriage obligations is problematic under the First Amendment. There is a long history of efforts to impose such obligations on communications platforms, from the social media at issue in NetChoice, to radio and television broadcasters, news papers, cable networks, and telephone networks.[38] But it turns out that the idea of “imposing common carriage obligations” gets the question backwards. The most universally accepted definition of common carriage turns on whether the firm eschews exercising editorial discretion over the content it carries and instead holds itself out as serving all members of the public without engaging in individualized bargaining.[39] In other words, the question is not whether government can impose common carriage obligations—it is whether a firm conducts its business in the style of a common carrier. Doing so can create an obligation to honor the obligations of common carriage (which may come with regulatory benefits). But a firm can avoid those obligations by engaging in individualized bargaining. This criterion constitutes the central consideration in all leading discussions of common carriage.[40]

This leads to the curious conclusion that the Commission’s proposal to classify BIAS as a Title II telecommunications service—a common carriage service—would only have effect to the extent that a BIAS provider elects to hold itself out as offering a common carriage service. This conclusion is reflected in the exchange that took place during the D.C. Circuit’s decision not to rehear the decision upholding the 2015 Open Internet Order en banc. When then-Judge Kavanaugh objected that classifying ISPs as common carriers impermissibly abridged their editorial discretion,[41] the authors of the majority opinion countered, explaining that “[w]hen a broadband provider holds itself out as giving customers neutral, indiscriminate access to web content of their own choosing, the First Amendment poses no obstacle to holding the provider to its representation.”[42] The 2015 Open Internet Order did not implicate the First Amendment because it only purported to regulate services over which providers exercised no editorial discretion.[43] This discussion implicitly recognized that speech over which providers exercise editorial control is protected by the First Amendment. If that were not the case, the fact that the 2015 Open Internet Order affected only speech over which providers exercised no editorial discretion would have been completely unresponsive to the concerns raised by then-Judge Kavanaugh. As described by the majority, this is a “if you say it, do it” theory, nothing more.[44]

Indeed, the initial Circuit Court opinion reached a similar conclusion—and noted the 2015 Open Internet Order recognized as much as well:

If a broadband provider nonetheless were to choose to exercise editorial discretion—for instance, by picking a limited set of websites to carry and offering that service as a curated internet experience—it might then qualify as a First Amendment speaker. But the Order itself excludes such providers from the rules. . . . Providers that may opt to exercise editorial discretion—for instance, by offering access only to a limited segment of websites specifically catered to certain content—would not offer a standardized service that can reach “substantially all” endpoints. The rules therefore would not apply to such providers, as the FCC has affirmed.[45]

The perverse incentive this creates bears emphasis. It is clear from the history of the Commission’s Open Internet proceedings that BIAS providers do not want to be subject to Title II regulation. These providers might today hold themselves out as providing services that might be considered by consumers to be common carriage services. If these providers want to avoid the obligations of Title II regulation, they would be able to do so by reducing the scope of their services to the point that they cannot be seen as holding themselves out as common carriers. The First Amendment affords no path for the Commission to compel ISPs to do otherwise.

A question still remains whether the specific rules proposed in the NPRM are problematic under First Amendment principles, even absent reclassification. In Turner, the Supreme Court upheld “must-carry” rules for cable networks, which are not common carriers, even where those networks have some claim to editorial discretion.[46] The result in Turner, however, turned on the “gatekeeper” or “bottleneck” control resulting from “the fact that there could only be one cable connection to any home” that places the cable operator in a position to block any other content providers from gaining access to subscribers.[47] In so holding, the Court emphasized the physical (rather than economic) nature of this consideration by contrasting cable with newspapers, which, “no matter how secure its local monopoly, does not possess the power to obstruct readers’ access to other competing publications.”[48] In an era of multimodal communications, where households routinely have connections to telephone, cable, and fiber optic networks, as well is fixed wireless, mobile wireless, and satellite connectivity options, makes clear the inapplicability of this rationale to platforms that lack control over an exclusive physical connection precludes applying this rationale to ISPs.

IV. The Major Questions Doctrine Casts Doubt on the Proposed Rules

The NPRM asks dozens of questions over several paragraphs relating to the Major Questions Doctrine.[49] First formally recognized by the Supreme Court in 2022, this doctrine explains that the Court “expect[s] Congress to speak clearly if it wishes to assign to an agency decisions of vast ‘economic and political significance.’”[50] Although only first recognized by the Court in 2022, the Major Questions Doctrine has developed over a span of many decades, through both Supreme Court cases and those decided by lower courts.[51] Importantly, nothing in these cases suggests that an agency’s recognition that its decisions may raise major questions renders those decisions any less major. Rather, the fact that an agency feels it is necessary to ask whether its decisions raise major questions suggests that those questions may well be major. This alone should give the agency pause about taking such decisions—especially in an era of intense judicial scrutiny of agency action it would a curious decision for any agency instead seek to structure its decisions so as to avoid the appearance of their having vast economic or political significance.

The vast significance of the proposed rules cannot be overstated—though the NPRM seems notably to attempt to understate it. Discussing broadband in 2015, former Chair Tom Wheeler described the Internet as “the most powerful network in the history of mankind.”[52] This was echoed in the 2015 Open Internet Order. The first sentence of the 2015 Order asserted that “[t]he open Internet drives the American economy and serves, every day, as a critical tool for America’s citizens to conduct commerce, communicate, educate, entertain, and engage in the world around them.”[53] Similarly, the NPRM for that Order began with: “The Internet is America’s most important platform for economic growth, innovation, competition, [ and] free expression . . . . [It] has been, and remains to date, the preeminent 21st century engine for innovation and the economic and social benefits that follow.”[54]

And, as made clear in the current NPRM, this importance has only been amplified since the beginning of the COVID-19 pandemic: “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.”[55] As stated by Chair Rosenworcel, “broadband is no longer nice-to-have; it’s need-to-have for everyone, everywhere. Broadband is an essential service”[56] Commissioner Starks similarly states that “there is simply no way to overstate broadband’s impact on the lives of individual Americans.”[57] And Commissioner Gomez states “El acceso a internet de banda ancha no solo es una herramienta vital para la educación, la atención de salud y para comunicarnos con nuestros seres queridos. También es un conducto de crítica importancia, esencial para la vida moderna.”[58]

In the NPRM, the Commission points to the D.C. Circuit’s opinion in the previous Open Internet Order case, as well as to Brand X itself, to suggest that the Brand X opinion settles the question of whether the Commission has authority to adopt these rules.[59] As an initial matter, that question simply was not before the Court in Brand X. In Brand X, the Court considered only whether the FCC could decide the classification under the Chevron after a lower court had adopted a conflicting interpretation of an ambiguous statute.[60] The question of whether Commission had authority to regulate cable broadband Internet service as a Title II telecommunications service was not a contested issue—only whether it could instead interpret ambiguity in the Communications Act to instead regulate it as a Title I information service. Similarly, the Major Questions Doctrine had not been expressly recognized by the Supreme Court at the time of the D.C. Circuit’s 2016 opinion. While it was “in the air,” it was a controversial doctrine—one that the Supreme Court had yet to expressly embrace. But the Court has done so now.

In the D.C. Circuit’s denial of en banc review, the judges Srinivasan and Tatel (the authors of the majority opinion under review) offers a more fulsome consideration of the major questions issue[61]—prompted by the dissenting opinion of then-judge Kavanaugh.[62] But in light of the Supreme Court’s own more fulsome embrace of the doctrine since that opinion, this analysis is unconvincing. In addition to over-relying on Brand X as having decided the matter, the majority makes another conceptually uncertain assumption: even if the Commission could have regulated Internet services at the time of Brand X, that doesn’t necessarily mean that the Commission has such authority today. The economic and political significance of those services is vastly different today than it was then. The Commission disclaimed such authority for more than 15 years, during which time the social, economic, technical, and political understandings of the Internet changed fundamentally from what they were at the time of Brand X. As discussed in the following paragraphs, this consideration is relevant to the Major Questions Doctrine analysis but goes unrecognized by the D.C. Circuit opinion.

While Brand X does not support the contention that classifying BIAS as a Title II does not present major question, it does briefly draw attention to an important argument that it does present a major question: respondents in Brand X raised the concern that “the Commission’s construction [of cable Internet as a Title I information service] is unreasonable because it allows any communications provider to ‘evade’ common-carrier regulation by the expedient of bundling information service with telecommunications.”[63] The Court rejected the premise of this argument, so did not decide whether it would, in fact, be an unreasonable construction.[64] But the same issue runs through the proposed rules: that BIAS providers need not hold out their offerings as common carriage services, so could “evade” Title II regulation through a simple expedient. Unlike in Brand X, where the Court rejected the premise that such evasion was possible, here the D.C. Circuit has found that the First Amendment compels such a result and the Commission has conceded that the rules necessarily allow it.[65]

This is a facially absurd result that demonstrates the fundamental mismatch between Title II regulation at BIAS service. Title II is a pervasive regulatory regime designed to regulate one of the foundational, utility-style, natural monopoly, industries of the 20^th century. It was designed for a technology to which editorial discretion was largely viewed as inapplicable.[66] And it was part of a regulatory quid pro quo that gave telephone carriers a privileged regulatory position in exchange for offering service on a common-carriage basis. As we approached the 21^st century, Title II was substantially amended through the 1996 Telecommunications Act to be a pervasively deregulatory statute that would phase out regulate in favor of competition and did so largely in response to the development of networks that offered advanced communications capabilities that were increasingly removed from the transparent, point-to-point, communications model of the 20^th century telephone network.[67]

It is little surprise that the Commission’s efforts today to reregulate modern communications networks under an expressly deregulatory act runs into problems such as the possibility for evasion. Similarly, it is unsurprising that it required tailoring of the Title II regulatory regime through extensive use of forbearance—another hallmark of a regulatory decision that presents major questions.[68]

The idea that Congress intends the Commission to be the primary regulator for BIAS services faces even greater headwind following the pandemic. Congress—which has longstanding awareness of the net neutrality debates—put in place significant communications-related regulations with the IIJA. This included the BEAD program, the Affordable Connectivity Program, and laying the groundwork for the Commission’s recently proposed Digital Discrimination rules.[69] This legislation, adopted during a period of single-party control of Congress and the White House, could have easily clarified the Commission’s regulatory authority over BIAS. Instead, it assigned primary authority for the federal government’s flagship broadband infrastructure program to another agency and assigned to the Commission new authority to adopt more limited broadband discrimination rules to ensure equitable access to that infrastructure.

These circumstances bear resemblance to the circumstances discussed by the Court in FDA v. Brown & Williamson Tobacco Corp, one of the precursor cases to the Major Questions Doctrine.[70] In Brown & Williamson, the Court held that the FDA did not have authority to regulate tobacco, a drug, under its statutory authority to regulate drugs. In reaching this conclusion, the Court recognized among other things that Congress knew the FDA did not have a clear claim to regulate tobacco and had adopted alternative regulatory regimes relating to the regulation of tobacco without giving the FDA regulatory authority over the matter.[71] It also recognized that “it is hardly conceivable that Congress—and in this setting, any Member of Congress—was not abundantly aware of what was going on.”[72] Here, as there, if Congress intended the FCC to exercise the vast authority that the Commission would claim in the NPRM, Congress was aware of the uncertainty over the Commission’s authority and could readily have clarified the matter.

Conclusion

The defining feature of the Safeguarding and Securing the Open Internet NPRM is its proposed reclassification of BIAS as a Title II telecommunication service. By choosing this approach, the Commission is needlessly steering into both legal uncertainty and political controversy. Reclassification will be challenged in court; these challenges have a high likelihood of success and, in the best case, will yield years of uncertainty for industry, consumers, and the Commission. Indeed, cases currently pending before the Supreme Court could force reconsideration of the NPRM before the proposed rules could even be finalized.

This is a curious approach to take, given that ISPs can, in effect, “opt out” of reclassification by offering an Internet experience that does not purport to be a common carriage service. This would be an unfortunate outcome that would lead to consumer confusion and possibly to degraded user experiences. It is a perverse approach to regulation, imposing burdensome rules that can be avoided by degrading the quality of service offered to consumers. And this demonstrates the extent to which the proposed reclassification is a perversion of the purposes of Title II—and to which it therefore is a decision that raises major questions.

And the approach is all the more curious given that there is little demonstrable need for the rules in the first place. But if the rules are to be adopted, the Commission could do so without reclassification. Were the Commission to follow the roadmap offered by the D.C. Circuit in Verizon, it is entirely likely that industry would acquiesce to the rules. That is the path the Commission should take, if it is to go down this path at all.

[1]    Safeguarding and Securing the Open Internet, WC Docket No. 23-230, Notice of Proposed Rulemaking, 88 Fed. Reg. 76,048 (Nov. 3, 2023) (NPRM).

[2]    Further detail on many of the topics discussed in these comments can be found in our prior publications. See, e.g., [[past comments, briefs, articles]].

[3]    Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, § 904 (2020).

[4]    American Rescue Plan Act of 2021, Pub. L. No. 117-2, § 7402 (2021) (ARPA).

[5]    Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, § 60502 (2021) (IIJA)

[6]    Id. § 60101, et seq.

[7]    Id. § 60102.

[8]    See Tom Wheeler, Finding the Best Path Forward to Protect the Open Internet (April 29, 2014), available at https://www.fcc.gov/news-events/blog/2014/04/29/finding-best-path-forward-protect-open-internet (“In its Verizon v. FCC decision the D.C. Circuit laid out a blueprint for how the FCC could use Section 706 of the Telecommunications Act of 1996 to create Open Internet rules that would stick. I have repeatedly stated that I viewed the court’s ruling as an invitation that I intended to accept.”).

[9]    See Part IV.

[10]   Nat’l Cable & Telecomms. Ass’n v. Brand X, 545 U.S. 967 (2005) (Brand X).

[11]   See Part I.

[12]   See Part III.

[13]   Brand X at 989 (“Cable companies in the broadband Internet service business ‘offer’ consumers an information service in the form of Internet access and they do so “via telecommunications.”).

[14]   Id. At 990 (“The question, then, is whether the transmission component of cable modem service is sufficiently integrated with the finished service to make it reasonable to describe the two as a single, integrated offering”). More precisely, the Court was considering whether this interpretation, made by the FCC, can be sustained under the Chevron doctrine. Id. at 989 (“This construction passes Chevron’s first step.”); id. at 997 (“We also conclude that the Commission’s construction was ‘a reasonable policy choice for the Commission to make’ at Chevron’s second step.”).

[15]   NPRM, paras. 11, 75–77 (citing U.S.Telecom Ass’n v. FCC, 825 F.3d 674(D.C. Cir. 2016) (USTA))

[16]   USTA at 705.

[17]   Id. at 766, n.8 (Williams, J, dissenting).

[18]   Id. at 748.

[19]   Brand X at 991.

[20]   Id. at 1012–13 (Scalia, J, dissenting).

[21]   Id. at 999, n.3.

[22]   See Reply Comments of Christopher S. Yoo, WC Docket No. 17-108.

[23]   A Non-Queue-Building Per-Hop Behavior (NQB PHB) for Differentiated Services, IETF Transport Area Working Group Draft (Oct. 24, 2022), available at https://www.ietf.org/archive/id/draft-ietf-tsvwg-nqb-14.html.

[24]   Low Latency, Low Loss, Scalable Throughput (L4S) Internet Service: Architecture, IETF Transport Area Working Group Draft  (July 27, 2022), available at https://www.ietf.org/archive/id/draft-ietf-tsvwg-l4s-arch-19.html. See also Mitchell Clark, The Quiet Plan to Make the Internet Feel Faster, The Verge (Dec. 9, 2023).

[25]   See, e.g., Joan Feigenbaum et al, A BGP-based Mechanism for Lowest-Cost Routing, 18 Distributed Computing 61 (2005).

[26]   Geoff Huston, Looking at Centrality in the DNS,APNIC Blog (Nov. 22, 2022), available at  https://blog.apnic.net/2022/11/22/looking-at-centrality-in-the-dns/ (“the use of ISP-provided recursive resolution occurs for between 65% to 80% of users . . . known open resolvers have a 20% market share”).

[27]   Id.

[28]   Firefox DNS-over-HTTPS, Mozilla Support, available at https://support.mozilla.org/en-US/kb/firefox-dns-over-https (“When DoH is enabled, Firefox by default directs DoH queries to DNS servers that are operated by a trusted partner . . . .”) (visited Dec. 13, 2023).

[29]   NPRM, paras 126, 128.

[30]   Importantly, and contrary to the longstanding policy approach of defining performance metrics that focus on increasingly higher bandwidth (Mbps targets), “It has been demonstrated that, once access network bit rates reach levels now common in the developed world, increasing link capacity offers diminishing returns if latency (delay) is not addressed.” Low Latency, Low Loss, Scalable Throughput (L4S) Internet Service: Architecture, supra note 24. Implementation of new technologies, such as L4S, could increase competition between existing networks than at lower cost than building out entirely new, increasingly higher-speed, infrastructure.

[31]   See Anna Read & Kelly Wert, How States Are Using Pandemic Relief Funds to Boost Broadband Access, Pew (Dec. 6, 2021), available at https://www.pewtrusts.org/en/research-and-analysis/articles/2021/12/06/how-states-are-using-pandemic-relief-funds-to-boost-broadband-access.

[32]   Starlink Availability Map, available at https://www.starlink.com/map.

[33]   See Joey Roulette, Amazon’s Prototype Kuiper Satellites Operating Successfully, Reuters (Nov. 16, 2023), available at https://www.reuters.com/technology/amazons-prototype-kuiper-satellites-operate-successfully-2023-11-16/.

[34]   See Mike Dano, T-Mobile Exceeds in Q3, Talks Broadband Strategy, Light Reading (Oct. 25, 2023), available at https://www.lightreading.com/fixed-wireless-access/t-mobile-exceeds-in-q3-talks-broadband-strategy (“T-Mobile reported a total of 557,000 new fixed wireless access (FWA) customers, a figure above most analyst expectations and slightly ahead of the company’s recent quarterly pace.”); Mike Dano, FWA Captures 90% of All New US Customers, Pleasing Around 90% of Them, Light Reading (March 6, 2023), available at https://www.lightreading.com/fixed-wireless-access/fwa-captures-90-of-all-new-us-customers-pleasing-around-90-of-them (“fixed wireless services accounted for 90% of all net broadband customer additions in the US during 2022 . . . . 90% rated their service as ‘good enough.’”).

[35]   IIJA § 60502(b)(2).

[36]   See infra, Part IV.

[37]   Moody v. NetChoice, LLC; NetChoice, LLC v. Moody; NetChoice, LLC v. Paxton, Nos. 22-277, 22-393 and 22-555 (U.S. Sup. Ct.).

[38]   See generally Christopher Yoo, Free Speech and the Myth of the Internet as an Unintermediated Experience, 78 Geo. Wash. L. rev. 697, Part II (2010) (surveying regulation of various media technologies).

[39]   See Biden v. Knight First Amendment Inst., 141 S. Ct. 1220, 1222 (2021) (Thomas, J., concurring).

[40]   See FCC v. Midwest Video Corp., 440 U.S. 689, 701 (1979); U.S. Telecom Ass’n v. FCC, 825 F.3d 674, 740 (D.C. Cir. 2016); Verizon v. FCC, 740 F.3d 623, 651 (D.C. Cir. 2014); Cellco P’ship v. FCC, 700 F.3d 534, 548 (D.C. Cir. 2012); NARUC II, 533 F.2d at 608; NARUC I, 525 F.2d at 641. Congress, courts, and agencies have applied the same formulation in a wide variety of contexts. See 15 U.S.C. § 375(3); 46 U.S.C. § 40102(7)(A); 40 C.F.R. § 202.10(b); Edwards v. Pac. Fruit Express Co., 390 U.S. 538, 540 (1968); Woolsey v. Nat’l Transp. Safety Bd., 993 F.2d 516 524 n.2. (5th Cir. 1993); Flytenow, Inc. v. FAA, 808 F.3d 882, 887–88 (D.C. Cir. 2015); Nichimen Co. v. M. V. Farland, 462 F.2d 319, 326 (2d Cir. 1972); Kelly v. Gen. Elec. Co., 110 F. Supp. 4, 6 (E.D. Pa.), aff’d, 204 F.2d 692 (3d Cir. 1953).

[41]   U.S. Telecom Ass’n, 855 F.3d at 484–89 (Kavanaugh, J., dissenting from the denial of rehearing en banc)

[42]   Id. at 392 (Srinivasan, J., joined by Tatel, J., concurring in the denial of the petition for rehearing en banc).

[43]   Id. at 388–89.

[44]   Id. at 392.

[45]   USTA at 743.

[46]   Turner Broad. Sys., Inc. v. FCC (Turner I), 512 U.S. 622, 656–57 (1994).

[47]   Id. at 656.

[48]   Id.

[49]   NPRM, paras 81–84.

[50]   West Virginia v. EPA, 142 S. Ct. 2587 (2022) (quoting Utility Air Regulatory Group v. EPA, 573 U.S. 302, 324 (2014)).

[51]   Id. at 2609 (“major questions doctrine label . . . took hold because it refers to an identifiable body of law that has developed over a series of significant cases all addressing a particular and recurring problem: agencies asserting highly consequential power beyond what Congress could reasonably be understood to have granted. Scholars and jurists have recognized the common threads between those decisions. So have we.” (citing cases dating to MCI Telecommunications Corp. v. American Telephone & Telegraph Co., 512 U.S. 218 (1994) (MCI)).

[52]   See Remarks of FCC Chairman Tom Wheeler, Silicon Flatirons Center (Feb. 9, 2015), available at http://transition.fcc.gov/Daily_Releases/Daily_Business/2015/db0209/DOC-331943A1.pdf; see also of same, available at https://www.youtube.com/watch?v=vHsHkKpxVkQ (in which Chairman Wheeler was more emphatic than in his prepared remarks); Brian Fung, FCC chairman warns: The GOP’s net neutrality bill could jeopardize broadband’s ‘vast future’, Washington Post (Jan. 29, 2015), available at http://www.washingtonpost.com/blogs/the-switch/wp/2015/01/29/fcc-chairman-warns-that-republican-bill-couldjeopardize-broadbands-vast-future/.

[53]   Protecting and Promoting the Open Internet, GN Docket No. 14-28, Report and Order on Remand, Declaratory Ruling, and Order, 80 Fed. Red. 19,737 (Apr. 15, 2015).

[54]   Protecting and Promoting the Open Internet, GN Docket No. 14-28, Notice of Proposed Rulemaking, 79 Fed. Reg. 37,448 (July 1, 2014).

[55]   NPRM, para 16.

[56]   NPRM, Statement of Chairwoman Jessica Rosenworcel.

[57]   NPRM, Statement of Commissioner Geoffrey Starks.

[58]   NPRM, Statement of Commissioner Anna M. Gomez.

[59]   NPRM, para 81 (“In the USTA decision, the D.C. Circuit reasoned that Brand X conclusively held that the Commission has the authority to determine the proper statutory classification of BIAS and that its determinations are entitled to deference, and so there is no need to consult the major questions doctrine here.”).

[60]   Brand X, at 974 (“We must decide whether [the FCC’s] conclusion [that cable companies that sell broadband Internet service do not provide ‘telecommunications service’ as the Communications Act defines that term] is a lawful construction of the Communications Act under Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc. and the Administrative Procedure Act. We hold that it is.”).

[61]   U.S. Telecom Ass’n, 855 F.3d at 385–88.

[62]   U.S. Telecom Ass’n, 855 F.3d at 422–26 (Kavanaugh, J., dissenting).

[63]   Brand X, at 997.

[64]   Id. (“We need not decide whether a construction that resulted in these consequences would be unreasonable because we do not believe that these results follow from the construction the Commission adopted.”).

[65]   See supra, Part III.

[66]   But see Christopher Yoo, Free Speech and the Myth of the Internet as an Unintermediated Experience, 78 Geo. Wash. L. rev. 697, 752–57 (2010) (discussing cases starting in the 1980s that began to recognize the applicability of editorial discretion concepts to telephone carriers).

[67]   See Telecommunications Act of 1996, Pub. L. No. 104-104 (1996) (“An act to promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies.”).

[68]   See U.S. Telecom Ass’n, 855 F.3d at 404–09 (Brown, J., dissenting from the denial of rehearing en banc) (citing MCI and Utility Air Regulatory Group v. EPA in discussing the problematic use of the Commission’s forbearance authority to “tailor” Title II to fit the needs of BIAS regulation).

[69]   See supra, notes 3–5.

[70]   FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000).

[71]   Id. at 155-156.

[72]   Id. at 156.

Summary

“Federal administrative agencies are required to engage in “reasoned decisionmaking” based on a thorough review and accurate characterization of the record. Their analysis must be based on facts and reasoned predictions; it must be rooted in sound economic reasoning; it must be logically coherent; it must not entail subterfuge or misleading statements. On even these most basic grounds the 2015 OIO falls short.

The entire open Internet rulemaking enterprise is an exercise in post hoc rationalization — the formulation of policy, not statutory interpretation. Net neutrality was determined by certain activists to be “necessary;” proponents were unable to get it from Congress; the FCC was willing; and it tried at least three times to cobble together some statutory basis to justify its preference for open Internet rules, as opposed to determining that such rules were necessary to enforcing a particular statutory provision.

The post hoc/ultra vires problem with the 2015 OIO is disturbingly similar to the one at issue in State Farm, which sets the standard by which the sufficiency of the Commission’s analysis is judged. In that case, the Court held that an agency’s (NHTSA’s) decisionmaking did not follow from the anal- ysis it undertook, nor the statutory purpose it purported to further. The same is true here. If deployment really were the aim of the 2015 OIO, the FCC could have directly encouraged it through any number of more direct (and almost certainly more effective) means. Instead, the Commission concocted a regulatory Rube Goldberg apparatus to do so only, at best, indirectly — and in a way that happened also to further a different, arguably ultra vires objective. Perhaps most tellingly, the

Commission was forced to undertake a series of actions, superficially independent of the 2015 OIO, in order to engineer several of the factual predicates necessary to enable it to justify its rule under the statute. An agency properly acting within the scope of its au- thority would not have to work so hard to fit the round peg of its chosen policy into the square hole of its statute.”

I.        Introduction

On behalf of the International Center for Law & Economics (ICLE), we thank the Federal Communications Commission (FCC or the Commission) for the opportunity to comment on this Notice of Proposed Rulemaking in the Matter of Implementing the Infrastructure, Investment, and Jobs Act: Prevention and Elimination of Digital Discrimination (NPRM).[1]

The Commission is contemplating creating a definition of “digital discrimination of access” under Section 60506 as “(1) policies or practices, not justified by genuine issues of technical or economic feasibility, that differentially impact consumers’ access to broadband internet access service based on their income level, race, ethnicity, color, religion, or national origin” and/or (2) “policies or practices, not justified by genuine issues of technical or economic feasibility, that are intended to differentially impact consumers’ access to broadband internet access service based on their income level, race, ethnicity, color, religion, or national origin.”[2]

Finding ways to increase deployment to those Americans who have been persistently difficult to connect is a laudable goal, but there are better and worse ways to proceed. Section 60506 is about making sure that broadband is deployed fairly, given existing technological and economic constraints. It is not a radical prescription from Congress, but a request that the FCC ensure that impermissible discrimination doesn’t affect broadband deployment.

This requires accounting for the current state of deployment, the economic realities that constrain deployment decisions, and the existing legal framework that constrains the manner in which the Commission can interpret Section 60506.

A.     The State of Deployment

As a baseline, it’s important to recognize that broadband providers have, by and large, done an excellent job of deploying to most households, while the data the FCC is currently gathering to assemble new broadband maps will enhance our ability to identify those problem areas that remain. Some of the comments in the record illustrate this baseline well. For example, NCTA observes in its comments that more than 98% of homes across income levels have access to fiber connections with speeds of at least one gigabit per second,[3] and that more than “97% of all homes and businesses in cable provider service areas have gigabit access regardless of race.”[4] As the FCC interprets Section 60506, the goal should be to work with this track record of success and not erect roadblocks that could prevent building on this base.

Moreover, broadband providers have been actively courting low-income consumers, particularly since Congress enacted successful programs such as the $14.2 billion Affordable Connectivity Program (ACP). By actively participating in these programs and offering tailored low-cost options, broadband providers are working to bridge the digital divide and reach unserved consumers. For example, Comcast’s “Internet Essentials” and “Internet Essentials Plus” programs offer affordable high-speed Internet service to eligible low-income households,[5] while AT&T’s “Access” program provides low-cost broadband plans to qualifying families.[6] Additionally, providers such as Charter Communications, through their “Spectrum Internet Assist” initiative, extend discounted Internet services to qualifying individuals and families.[7]

B.     The Economic Constraints of Section 60506 and Deployment

Section 60506 directs the FCC to prevent discrimination in broadband access based on income level. It also instructs the Commission to consider issues of technical and economic feasibility. A fundamental challenge presented by the intersection of these two directives is that a prospective broadband territory’s income level is related, albeit indirectly, to the economic feasibility of deployment projects to serve that territory. Economic feasibility is driven largely by population density and anticipated broadband adoption and retention. Broadband adoption and retention are, in turn, driven by income, willingness-to-pay, and many other factors. This present an “income conundrum,” in that it is nearly impossible to completely disentangle a given customer base’s anticipated rates of broadband adoption and retention from their income level.

It is well known and widely accepted that income is correlated with many factors that are not identified in Section 60506, including population density, age, educational attainment, home-ownership status, home-computer ownership and usage, and rates of broadband adoption and un-adoption. Because each of these additional factors is correlated with income level, many effects-based statistical tests of broadband adoption are likely to produce false positives, concluding the presence of digital discrimination even where explicit efforts are made to avoid such discrimination.

This problem is exacerbated if providers are not allowed to point to the relative profitability of prospective deployment investments. Like all firms, broadband providers have limited resources to invest. While profitability is a necessary precondition for investment, not all profitable investments can be undertaken. At any given time, firms must choose from numerous potentially profitable projects, some more apparently profitable than others. Firms must be allowed to choose the mix of profitable investments that they believe will best advance long-term deployment without fear of having to defend claims of income discrimination.

While the NPRM[8] and several commenters[9] suggest the statute can be read to give the FCC broad authority to redress the disparate impact of deployment decisions based on income and race (among other impermissible deployment factors), principles of statutory interpretation preclude that reading. Supreme Court precedent on antidiscrimination statutes makes clear how Congress can write disparate-impact law.[10] It also makes clear that many provisions of antidiscrimination statutes apply only to intentional discrimination.[11] The difference turns on the language of the operative text and the statutory purpose, as illustrated by things like the overall structure of the legislation and the stated policy objective (including legislative intent, if it can be known).[12] Applying this rubric to Section 60506, we find that it lacks requisite “results-oriented language” that would make it into an effects-oriented statute. Thus, the prohibition against digital discrimination “based on income level, race, ethnicity, color, religion, or national origin” would apply only in cases of intentional discrimination in deployment decisions. Mere statistical correlation between deployment and protected characteristics is insufficient to support a finding of discrimination.

As to the overall structure of the Act, while the Infrastructure, Investment, and Jobs Act (IIJA) incorporates some of its provisions into the Communications Act, Section 60506 is not among them. The IIJA is concerned chiefly with promoting broadband buildout through the use of subsidies. As to the policy objective, the scant congressional record on Section 60506 fails to illuminate the text, leaving us to consider the plain meaning of the statute. The “statement of policy” in subsection (a) holds that subscribers “should” benefit from equal access to broadband and that the Commission “should” take steps to ensure such equal access.[13] This “precatory”[14] section tells us the goal of the operative text: to make sure the Commission takes steps to promote broadband buildout. The mandate to create rules that facilitate equal access to broadband service—including by “preventing digital discrimination of access based on income level, race, ethnicity, color, religion, or national origin”—grants the Commission authority to set up a regulatory structure that would prevent intentional discrimination in deployment decisions, using language akin to those antidiscrimination provisions that speak only to intent.[15] This limited authority doesn’t allow for disparate-impact analysis, nor does it create a private right of action to enforce against any broadband provider. Instead, it empowers the Commission (and the Office of the Attorney General) to ensure federal policies promote equal access by prohibiting such deployment discrimination.[16]

Broadband buildout is big business, in the sense that a lot of money is invested by providers and governments (in the form of subsidies) alike. How these providers are regulated is a “major question” of “vast economic [and] political significance.”[17] To allow the Commission to exercise broad authority to ameliorate disparate impact, as suggested by some commenters, would be to find the proverbial “elephants in mouseholes”[18] in this statute, which the U.S. Supreme Court has not permitted.

In Part II, we review specific questions in the NPRM, the economics underlying deployment decisions, and how these relate to potential digital discrimination.

In Part III, we review some of the legal implications of attempting to regulate “digital discrimination” under both an intent-based and effects-based approach.

In Part IV, we consider the need for safe harbors and other procedural protections.

In Part V, we conclude and offer some thoughts on how to give best effect to Section 60506.

II.      Using Income as a Measure of Digital Discrimination

Section 60506 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.

We assert that the FCC should adopt an intent-based discriminatory-treatment standard, rather than one that opens the doors to disparate-impact claims. The high risk of false positives under a disparate-impact standard would stifle broadband deployment through additional costs, delays, and risk of litigation. Similarly, FCC rules should articulate a presumption of nondiscrimination in which allegations of digital discrimination must be demonstrated, rather than a presumption of discrimination that must be rebutted for each deployment decision.

It is clear that population density and anticipated broadband adoption are the key factors affecting the economic feasibility of broadband-deployment investments. Affordability and willingness to pay are the primary drivers of broadband adoption where it is available. Indeed, Congress has recognized this reality in its recent legislation. The IIJA’s Broadband Equity and Access program provides more than $42 billion in grants to state programs to help them support providers and give assistance directly to users.[19] The Affordable Connectivity Program provided another $14 billion in funding to help users pay for devices and broadband connections.[20]

If the Commission has good evidence of intentional discrimination in the deployment of broadband, it has a role to play in preventing it. But attempts to use the regulatory process to root out digital discrimination will do little to shrink the digital divide without substantial resources to increase adoption and retention of broadband services.

A.      The Indirect Relationship Between Income and Economic Feasibility

The NPRM asks “how does a consumer’s income level, or the average income level of a geographical area, relate to economic feasibility in the deployment and provision of broadband internet access services?”[21]

The short answer is that income level is only indirectly related to economic feasibility. When evaluating the economic feasibility of a potential investment, broadband providers consider that territory’s anticipated adoption rate.[22] There is evidence that income, willingness to pay, and many other factors affect consumers’ adoption and retention decisions. Thus, it can be said that income level is related to deployment decisions only through a daisy chain linking anticipated adoption and retention rates to consumers’ willingness to pay, with willingness to pay loosely correlated with income level.

Population density is widely acknowledged to be the most important factor driving broadband-deployment decisions. For example, the U.S. Government Accountability Office (GAO) reports that population density is the “most frequently cited cost factor” and “a critical determinant of companies’ deployment decisions.”[23] Academic research supports the GAO’s conclusions. Brian Whitacre & Roberto Gallardo describe population density as one of “the main determinants of Internet availability.”[24] Similarly, Tonny Oyana, citing earlier research, concluded that “[l]imited broadband access is common in rural communities because of geographic remoteness and low population density.”[25]

Several other factors also affect the profitability of broadband-deployment investments, including:

• Terrain: The GAO notes that “it is more costly to serve areas with low population density and rugged terrain with terrestrial facilities than it is to serve areas that are densely populated and have flat terrain.”[26]
• Backhaul: That is, the cost of routing Internet traffic from rural areas to larger cities in order to connect to a major Internet-backbone provider. The GAO also reports that the cost of backhaul can affect broadband deployment to rural areas.[27]
• State-level broadband-funding programs: Whitacre & Gallardo find such programs are associated with a modest increase (1.2–2.0 percentage points) in broadband availability.[28]

Juan Schneir & Yupeng Xiong note that firms are more likely to deploy broadband in urban and suburban areas, rather than rural areas, due to both cost and demand factors. They conclude this is “because of the high density of users willing to pay for high-speed broadband services and the relatively low network rollout costs in urban and suburban areas.”[29] Consistent with Schneir & Xiong’s conclusion, the GAO also finds that population density is an important factor on the demand side of deployment decisions. In particular, the GAO concludes that it is more difficult to “aggregate sufficient demand” to pay for broadband service in low-density rural areas.[30]

But broadband access alone also may not be sufficient to drive greater rates of broadband adoption. For example, Brian Whitacre and his co-authors found that while the reduced levels of broadband access in rural areas explained 38% of the rural-urban broadband-adoption gap in 2011, differences in other general characteristics—such as income and education—explain “roughly half of the gap.”[31] Another GAO report concluded that “even where broadband service is available … an adoption gap may persist due to the affordability of broadband and lack of digital skills.”[32] The report further notes that nearly one-third of those with access to broadband do not subscribe to it and that “lower-income households have lower rates of home broadband subscriptions.”[33]

The price of broadband services is another significant factor that affects adoption. A National Telecommunications and Information Administration (NTIA) survey of Internet use identified “affordability as a driving factor around why some households continue to remain offline, confirming that cost of service is an essential part of increasing Internet adoption.”[34] The survey reported that the average price that offline households wanted to pay for Internet access was approximately $10 per month, and about 75% of households gave $0 or “none” as their answer. Kenneth Flamm & Anindya Chaudhuri’s empirical research finds that broadband price is a “statistically significant driver” of broadband demand.[35] They conclude that broadband-price declines in the early 2000s explain “some portion” of increased broadband adoption.[36] Victor Glass & Stela Stefanova’s empirical study found that higher prices “depress” demand for broadband.[37]

Price sensitivity is linked to income. Christopher Reddick and his co-authors concluded that “[i]ncome is a major factor that is likely to influence broadband adoption especially where technology is available.”[38] Glass & Stefanova find broadband service to be a normal good, which means that increased incomes are associated with increased broadband adoption—a finding consistent with previous research.[39] Similarly, the GAO reports: “A recent nationally representative survey by Consumer Reports reported that nearly a third of respondents who lack a broadband subscription said it was because it costs too much, while about a quarter of respondents who do have broadband said they find it difficult to afford.”[40] Alison Powell and her co-authors report that a significant number of low-income Americans engage in a cycle of broadband adoption and “un-adoption,” in which they adopt broadband and then drop it for financial or other reasons, and then re-adopt when circumstances improve for them.[41]

In addition to price and income guiding a household’s broadband-adoption decisions, other factors are also relevant. Oyana’s empirical research concludes that income, the share of a population who are senior citizens, and the share with some college education are the “three most important demand-side factors” affecting both access and adoption.[42] On the demand side, the GAO reports that “demand will be greater in areas where potential customers are familiar with computers and broadband.”[43] The GAO reports that “[o]ther barriers include lack of digital skills,” citing a 2016 Pew Research Center report finding that “about half of American adults were hesitant when it comes to new technologies and building their digital skills.”[44]

It can be argued that the gap between rates of broadband access and broadband adoption may present the real digital divide. That is, large numbers of American who have access to broadband do not adopt it, and some who do may “un-adopt” it. While income is a key factor in a household’s adoption choice, it is only one of several important factors, which also include age, educational attainment, and home-computer ownership and usage—each of which is, in turn, also correlated with income.

If firms do not expect sufficient levels of adoption, then deployment may be unprofitable. It would be a mistake to infer that income discrimination in deployment causes low rates of broadband adoption in low-income communities when low income itself—and other factors correlated with income—may be a primary cause of low rates of broadband adoption, even where broadband access is available.

B.      Profitability, Return on Investment, and Economic Feasibility

The NPRM asks, “should a provider be permitted to defend a claim of income-based intentional discrimination by offering projections showing that deploying to a particular community would likely produce a lower-than-normal rate of return on investment?”[45]

Section 60506 requires the Commission to take account of “issues of technical and economic feasibility.” There is broad understanding that “economic feasibility” here refers to profitability.[46] More precisely, a project is economically feasible if it provides an adequate return on investment (ROI). Like all firms, broadband providers have limited resources with which to make their investments. While profitability is a necessary precondition for investment, not all profitable investments can be undertaken. Among the universe of potentially profitable projects, firms are likely to give priority to those that promise greater returns on investment relative to those with lower ROI.[47] Thus, any evaluation of potential digital discrimination must examine not only whether a given deployment is likely to be profitable, but also how its expected returns compare to other investment opportunities.

This concept—opportunity cost—is fundamental not just to economics, but to our daily lives. Indeed, we all live in a world of endless wants, but only limited resources (e.g., money, time, natural resources) to satisfy them. As a result, we must make choices about how best to use those resources to satisfy our wants. By choosing to pursue one activity, we must forgo another. The value of what we have foregone is our opportunity cost.[48] A worker contemplating quitting their job to start a business is certain to consider the income they would be giving up as an opportunity cost of entrepreneurship.

Similarly, a broadband provider who invests in region A recognizes that it is giving up the opportunity to invest in region B. But the provider faces another factor the would-be entrepreneur does not. If the provider regularly chooses low-ROI investments over higher ROI investments, then its shareholders may choose to replace management with a team that can provide better returns. The opportunity-cost calculus is unavoidable.

Thus, it is surprising to see comments to this proceeding that suggest the FCC should ignore opportunity cost in evaluating economic feasibility.[49] Section 60506 specifically calls on the FCC to consider economic feasibility—not financial feasibility or accounting feasibility. There is no evidence that this was an accident or mistake. Because opportunity cost is a cornerstone of economic analysis, it would be reasonable to conclude that the law’s mandate to consider economic feasibility was meant to rely on economic analysis and, in turn, to consider the opportunity costs of foregone deployment investments. We strongly encourage the Commission to include opportunity costs that providers face whenever it evaluates alleged digital discrimination in deployment.

C.      Demonstrating Discrimination: The Income Conundrum

The NPRM asks, “[S]hould a provider be permitted to defend a claim of income-based intentional discrimination by offering projections showing that deploying to a particular community would likely produce a lower-than-normal rate of return on investment? How are we to determine whether a proffered economic justification, such as rate of return, is a pretext for income-based discrimination?”[50] The NPRM reports that some have argued a sub-normal profit margin should not be considered sufficient reason to claim economic infeasibility and that the Commission should rarely excuse discrimination on such grounds.[51]

A provider should be permitted to defend a claim of income-based intentional discrimination by demonstrating that deploying to a particular community would likely produce a lower return on investment relative to other likely alternatives investments. Thus, a provider should be able to defend a claim of income-based intentional discrimination even if deploying to a particular community would likely produce a higher than “normal” ROI—so long as other deployment alternatives produce anticipated ROIs that are greater still. As noted above, a positive ROI is a necessary precondition for investment, but not all profitable investments can be undertaken. Evaluations of potential digital discrimination must examine not only whether a given deployment is likely to be profitable, but also how its expected returns compare to other investment opportunities.

It would be near-impossible to evaluate demographic, economic, and financial data to determine whether profitability, ROI, or other economic reasons constitute a pretext for a pattern of so-called income-based discrimination. Our research indicates that such an approach would likely lead to a huge number of “false positives”—finding discrimination where no discrimination is intended or, indeed, where it was explicitly avoided. This presents what we call the “income conundrum,” because it is virtually impossible to disentangle the factors affecting economic feasibility from factors correlated with membership in certain income and other protected classes.[52]As such, alleged patterns of income-based discrimination provide very little (if any) information, and certainly not enough information to sufficiently prove a violation of Section 60506.

Former FCC Chief Economist Glenn Woroch combined recent census-block-level wireline-broadband deployment data from the Commission’s Form 477 reports with demographic and income data published by the U.S. Census Bureau to evaluate broadband availability rates for wireline 100/20 Mbps service (1) between census-based “white” and “non-white” households and (2) between households above and below the Federal Poverty Guidelines.[53] His statistical analysis indicates broadband availability rates are about 5 percentage points higher for non-white households than for white households, and that broadband availability rates are nearly identical for households above and below the Federal Poverty Guidelines.

Woroch’s results are consistent with the statistical analysis published by Randolph Beard & George Ford.[54] Their data indicate that U.S. Census blocks with higher population densities are associated with a higher share of minority residents and lower average incomes. Beard & Ford also report that blocks with a higher share of minority residents have lower fixed-broadband adoption rates and a higher share of mobile-only broadband use. Their empirical model includes four demand factors for each Census block: fixed-broadband adoption rate, mobile-broadband adoption rate, the share of persons with a tertiary education, and the share of homes with a computer. The model also includes five cost factors: population density, the share of rural blocks within the Census-block group, and three cost categories from CostQuest. Using this information, they evaluate: (1) fiber deployment by race, (2) fiber deployment by income level, (3) download speeds by race, and (4) download speeds by income level. Beard & Ford conclude from their statistical analysis that there is “no meaningful evidence of digital discrimination in either race or income for fiber deployments or for download speeds.”

It is well-known and widely accepted that income is correlated with many factors that are not identified in Section 60506, including population density, age, educational attainment, home-ownership status, home-computer ownership and usage, and broadband adoption and un-adoption. But because each of these other factors is, in turn, correlated with income level, applying an effects-based statistical analysis is likely to produce false positives that conclude the presence of digital discrimination, even if there was an explicit effort to avoid such discrimination. This is a version of Nobel laureate Ronald Coase’s well-known quote: “If you torture the data long enough, it will confess.”^[55]

Indeed, as the Competitive Enterprise Institute (CEI) notes, even if the Commission were to adopt a disparate-impact standard (discussed infra), it would be exceedingly difficult, if not impossible, to prove income discrimination through a series of correlated proxies under existing Supreme Court precedent:

Thus, as Hazen demonstrates that as long as the motivating factor for digital discrimination of access is analytically distinct from the protected characteristic (even if one is correlated with the other, like age when set against years of service), the person who is wholly motivated by other factors wouldn’t be discriminating based on protected characteristics. [56]

Thus, even if correlational evidence is introduced, it will be of such little probative value as to contribute very little information to a proceeding. For example, even if statistical analysis indicated a relationship between income and some other non-protected characteristic (e.g., education), under 1993’s Hazen Paper Co. v. Biggins decision, that information could not be used to demonstrate income discrimination. The only way that a prohibition on income-based discrimination would make sense at all would be if Section 60506 were construed as prohibiting intentional discrimination. In this sense, claims would have to be brought on the basis that a provider intentionally discriminated against a low-income household, or against a territory for being low-income, with all else being equal. That is, if a particular opportunity would otherwise have been included in a provider’s deployment plans, discrimination could be found if that provider refrained from deploying based on an intent not to serve low-income households in the area.

III.    Section 60506 Empowers the Commission to Facilitate Equal Access to Broadband by Prohibiting Intentional Discrimination

Congress did not, with Section 60506, turn the FCC into a general-purpose civil-rights agency. It did, however, give the Commission a set of tools to identify and remedy particular acts of discrimination.

In the NPRM, the Commission proposes:

to define “digital discrimination of access,” for purposes of this proceeding, as one or a combination of the following: (1) “policies or practices, not justified by genuine issues of technical or economic feasibility, that differentially impact consumers’ access to broadband internet access service based on their income level, race, ethnicity, color, religion, or national origin”; and/or (2) “policies or practices, not justified by genuine issues of technical or economic feasibility, that are intended to differentially impact consumers’ access to broadband internet access service based on their income level, race, ethnicity, color, religion, or national origin.”[57]

Although some commenters have called for the FCC to employ an effects-based “disparate impact” analysis under Section 60506,[58] we continue to believe this would be a mistake under both the structure of Section 60506 and the Supreme Court’s established jurisprudence on disparate-impact analysis. A more reasonable approach for the Commission would be to construe Section 60506 as directing an analysis of intentional discrimination in deployment.

Statutes that define impermissible discrimination, such as the Civil Rights Act of 1964, can be analyzed legally either as addressed toward explicit discriminatory intent, referred to as “discriminatory treatment,” or toward behavior inferred from discriminatory effects, such as the “disparate impact” that the challenged behavior or policy has on a protected class.[59] A case involving discriminatory treatment is somewhat more straightforward,[60] insofar as it demands evidence demonstrating that decisions adversely affecting some protected class were made based on bias toward members of that class. In this context, where deployment decisions are made on the basis of discriminatory intent, the Commission is on much firmer legal ground to pursue them.

By contrast, were the Commission to adopt a “disparate impact” assessment as part of Section 60506, it would face a steep uphill legal climb. Among the primary justifications for disparate-impact analysis is to remedy those historical patterns of de jure segregation that left an indelible mark on minority communities.[61] While racial discrimination has not been purged from society, broadband only became prominent in the United States well after all forms of de jure segregation were made illegal, and after Congress and the courts had invested decades in rooting out impermissible de facto discrimination. Any policy intended to tackle disparate impact in broadband deployment needs to take this history into account.

Commenters like Public Knowledge point to Section 60506’s stated policy objective to make the case that the statute encompasses disparate-impact analysis.[62] They also situate the IIJA as a part of the universal service regime of the Communications Act.[63] However, Section 60506 was not incorporated into the Communications Act, unlike other parts of the IIJA. In other words, the FCC’s general enforcement authority doesn’t apply to the regulatory scheme of Section 60506. The FCC must rely on the statute alone for that authority. Moreover, the statement of policy in Section 60506(a) is exactly that: a statement of policy. Courts have long held that sections using words like “should”[64] are “precatory.”[65] While this helps to illuminate the goal of the provision at issue, it does not actually expand the remit of FCC authority. The goal of the statute is clear: to make sure the Commission takes steps to promote broadband buildout. It empowers the Commission (and the Office of the U.S. Attorney General) to ensure that federal policies promote equal access by prohibiting such deployment discrimination.[66]

There is little evidence that IIJA’s drafters intended the law to be read so broadly. The legislative record on Section 60506 is exceedingly sparse, containing almost no discussion of the provision beyond assurances that “broadband ought to be available to all Americans,”[67] and also that the provision was not to be used as a basis for the “regulation of internet rates.”[68] Given that sparse textual basis, reading Section 60506 as granting the Commission expansive powers to serve as a broadband civil-rights czar could also run afoul of the “major questions” doctrine.[69] That doctrine requires Congress “to speak clearly if it wishes to assign to an agency decisions of vast ‘economic and political significance.’”[70] To allow the Commission to exercise the type of broad authority to ameliorate disparate impact, as suggested by some commenters, would be to find the proverbial “elephants in mouseholes”[71] in this statute that the Supreme Court has not allowed.

More specifically, it does not appear that Section 60506 can be reasonably construed as authorizing disparate-impact analysis. While the Supreme Court continues to uphold disparate-impact analysis in the context of civil-rights law, it has recently imposed some important limitations. For example, in Texas Department of Housing & Community Affairs v. The Inclusive Communities Project Inc., the Court upheld the disparate-impact doctrine, but noted that disparate-impact claims arise under statutes explicitly directed “to the consequences of an action rather than the actor’s intent.”[72] For example, in the Fair Housing Act, Congress made it unlawful:

To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.[73] [Emphasis added.]

The Court noted that the presence of language like “otherwise make unavailable” is critical to construing a statute as demanding an effects-based analysis.[74] Such phrases, the Court found, “refer[] to the consequences of an action rather than the actor’s intent.”[75] Further, the structure of a statute’s language matters:

The relevant statutory phrases… play an identical role in the structure common to all three statutes: Located at the end of lengthy sentences that begin with prohibitions on disparate treatment, they serve as catchall phrases looking to consequences, not intent. And all [of these] statutes use the word “otherwise” to introduce the results-oriented phrase. “Otherwise” means “in a different way or manner,” thus signaling a shift in emphasis from an actor’s intent to the consequences of his actions.[76]

Previous Court opinions help to parse the distinction between statutes limited to intentional-discrimination claims and those that allow for disparate-impact claims. Particularly relevant here, in Alexander v. Sandoval, the Court emphasized that it was “beyond dispute—and no party disagrees—that § 601 prohibits only intentional discrimination.”[77] The relevant statutory language stated that “No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.”[78]

Thus, when Public Knowledge argues that “assertion that the phrase ‘based on’ limits the Commission to disparate intent is based on the dissent not the majority opinion of Inclusive Communities. The majority’s opinion states the exact opposite… The phrase at issue in Inclusive Communities was ‘because of,’ which is equivalent to ‘based on’ contained in section 1754…”[79], it gets both Inclusive Communities and previous precedents wrong. First, Inclusive Communities primarily based its opinion on the “otherwise make unavailable” language and not on the “because of” language on its own. Second, the closest analogy for “based on” is the “grounded on” language of Title VI, which does not include the “otherwise” language found to be so important in Inclusive Communities. If the Court has found “grounded on” means only intentional discrimination, then it is hard to see how “based on” wouldn’t lead to the same conclusion.

Further, even where disparate-impact analysis is appropriate, the Court held in Inclusive Communities that it is significantly constrained by the need to ensure that the free-enterprise system continues to function:

[Supreme Court precedent] also teach[es] that disparate-impact liability must be limited so… regulated entities are able to make the practical business choices and profit-related decisions that sustain a vibrant and dynamic free-enterprise system. And before rejecting a business justification…a court must determine that a plaintiff has shown that there is “an available alternative … practice that has less disparate impact and serves the [entity’s] legitimate needs.”[80] [Emphasis added.]

In practice, this means that lower courts are free to probe a disparate-impact claim rigorously in order to avoid such claims becoming a club to wield against regulated entities.[81] It also suggests that, in a context such as Section 60506’s proscriptions against digital discrimination, they may not be so broad as to render it impossible for broadband providers to make effective decisions about which deployment projects are economically feasible.

More to the point, as Section 60506 was drafted without “results-oriented language”[82] and instead frames the prohibition against digital discrimination as “based on income level, race, ethnicity, color, religion, or national origin,”[83] this would put the rule squarely within the realm of prohibitions on intentional discrimination.[84] That is, to be discriminatory, the decision to deploy or not to deploy must have been intentionally made based on or grounded on the protected characteristic. Mere statistical correlation between deployment and protected characteristics is insufficient.

In enacting the IIJA, Congress was undoubtedly aware of the Court’s history with disparate-impact analysis. Had it chosen to do so, it could have made the requirements of Section 60506 align with the requirements of that precedent. But it chose not to do so, thereby reinforcing that it intended the FCC to have some discretion, but to err on the side of caution when declaring certain practices an impermissible form of discrimination.

This is not to say that Section 60506 has no effect. As mentioned above, it can be reasonably read to encompass intentional discrimination, given appropriate evidence. Further, the means available to the FCC to remedy undesirable patterns of deployment are manifold. The only options rendered off the table would be requirements that are technologically or economically infeasible, such as an unfunded mandate that providers deploy at maximum speeds to all households simultaneously.

Moreover, as NCTA noted in its comments, the “intentional discrimination” standard provides ample room for the Commission to act upon instances of impermissible discrimination:

[I]t is NCTA’s position that discriminatory intent need not be proven with a “smoking gun,” such as documentary evidence overtly acknowledging or demonstrating discrimination, but can instead be sufficiently pled and shown with evidence including a combination of impact elements and facts such as: statistics demonstrating a pattern of discriminatory intent, the sequence of events leading to the decision, departures from normal procedures, and a consistent pattern of actions imposing much greater harm on the protected class that is unexplainable on grounds other than discriminatory ones.[85]

Indeed, in Vill. of Arlington Heights v. Metro. Hous. Dev. Corp.,[86] the Supreme Court established a legal test for determining intentional discrimination. The test requires a plaintiff to demonstrate that a discriminatory intent was a motivating factor behind the challenged action or decision.[87] To prove intentional discrimination, the Court identified several factors that can serve as evidence.  Under this test, “[d]etermining whether invidious discriminatory purpose was a motivating factor demands a sensitive inquiry into such circumstantial and direct evidence of intent as may be available.”[88] Such an analysis can include circumstantial evidence of:

• A history of discriminatory practices or a pattern of decisions that have consistently disadvantaged a protected class;[89]
• Significant departures from standard procedures, substantive norms, or established practices can indicate discriminatory intent, especially if they seem designed to disadvantage a specific group;[90]
• Statements or actions by decisionmakers during the decision-making process that reveal prejudice or bias against a protected group;[91]
• Evidence of differential treatment or disparate outcomes for similarly situated individuals from different protected groups; or[92]
• Unjustified or pretextual explanations that are implausible, inconsistent, or unsupported by facts.[93]

As the DOJ observes, while statistical evidence of patterns of discrimination cannot themselves be used as proof of discriminatory intent, they can be used as supporting evidence in such claims.[94] Critically, as noted in the section above, when dealing with claims of income-based discrimination, this means that challenges to deployment decisions must be made on the basis of bias regarding consumers at a particular income level, and cannot be divined through statistical inferences in the myriad factors that are merely correlated with income (such as education, computer ownership, adoption levels, and willingness to pay).

In sum, Section 60506 is an intentional-discrimination statute and the Commission’s rules should reflect that fact. To create a disparate impact regime would be to invite a drawn-out legal battle that would likely result in the rules being struck down.

IV.    The Commission Should Adopt Sufficient Procedural Protections

The Commission asks whether it should adopt safe harbors, rely on case-by-case inquiry into “technical or economic” feasibility issues, or both.[95] We believe that the FCC needs to establish clear and robust safe harbors and affirmative defenses to discrimination complaints. Without such safe harbors, the administration of Section 60506 would become unwieldy, as the Commission wades through what is likely to be many false positives. There are a few situations that provide prima facie evidence that a broadband provider is not impermissibly discriminating against low-income consumers, or consumers in an otherwise protected class.[96]

For instance, in areas where a provider deploys service that is adhering to obligations under federal or state subsidy programs, a provider is obviously trying to reach underserved communities. Any shortcomings in deployment in such an area are almost certainly going to be the result of technical or economic realities. Similarly, where a provider is constrained by federal or state laws regarding permitting or access to rights of way, it would be fruitless to investigate; only once a provider is actually able to deploy legally should it be subject to scrutiny under Section 60506.

Similarly, there are constrains implicit in particular technologies that would make it difficult to accurately assess discrimination in some cases.[97] For example, when examining deployment of wireless providers, spectrum availability is a major issue that can constrain a provider’s ability to deploy in certain areas. Relatedly, the nature of a particular geographic area may limit how signals propagate. Even if a wireless provider fully deploys in such areas, building density or, inversely, sparsely populated areas might appear to be underperforming. In such cases, the Commission should adopt a technological safe harbor that assumes best efforts in certain cases imply good-faith compliance with Section 60506.

Thus, not only do all providers need some form of safe harbor, given the limitations of technology, but the Commission should also employ tailored safe harbors that incorporate the unique features of both wireless and wired providers.

Moreover, safe harbors do more than merely safeguard against an unfair or inefficient process, but may become a virtual necessity if the Commission attempts to rely on a “disparate impact” standard. As USTelecom noted in its comments, related civil-rights laws invariably include safe harbors in the context of fact-dependent, complicated proceedings.[98] These well-established legal proceedings create a formal burden-shifting framework that attempts to capture the economic and business realities underlying challenged practices.[99]

The Commission has also asked whether it would be appropriate to rely on its informal consumer-complaint process as part of its enforcement of Section 60506.[100] An informal complaint process that invites input from individuals directly affected by deployment decisions can make sense in some cases, while in others, a more formal complaint process will be necessary. Even if the Commission can appropriately delineate these cases, certain procedural protections should be in place to ensure the process is not abused.

First, there should be some form of standing requirement, such that a complainant actually is in a position to obtain broadband service, but is unable to do so (or do so at “comparable speeds, capacities, latency, and other quality of service metrics in a given area, for comparable terms and conditions”[101]). Given how large the national deployment footprint is, without an injury-in-fact requirement, opening the process to third parties who lack direct interest would be unmanageable. It would burden both the Commission and providers, who we otherwise want to spend their scarce resources on further deployment. Moreover, private parties with adequate standing who believe they have valid complaints can file through an informal process that could theoretically be handled much more quickly and efficiently.

The Commission also asks whether it should adopt a private right of action or permit state and local government enforcement against broadband providers.[102] Both options are likely to prove unworkable for a number of reasons. First, states and localities are often in a position of both granting access to necessary facilities as well as granting permission for providers to deploy. A right of action for states and localities—or even a process by which states and localities can source complaints in their jurisdiction and try those complaints—would create an imbalance in the bargaining process between providers and state authorities. Those authorities could use the complaint process as a leverage tool to extract inappropriate concessions from providers as they negotiate franchising agreements and other permissions necessary for deployment in particular jurisdictions.[103] Giving them a dual role in this respect—as both a complainant that can use legal process to intervene in providers’ deployment decisions as well as a party seeking to conduct an arm’s length negotiation with providers—threatens to seriously distort deployment incentives.

Moreover, providers are responsible for managing deployment decisions in a way that inherently crosses jurisdictional barriers, particularly for large providers that cross state lines. A given locality could be in a position to complain about a provider’s deployment decision, even if that decision makes technical and economic sense across jurisdictional boundaries. A state or locality is not well-positioned to adjudicate this problem, while the FCC is extremely well-positioned to do so.

Ostensibly in the interests of completeness, the NPRM asks whether it has authority to retroactively pursue claims for digital discrimination.[104] We believe it should go without saying that this procedure should be forward looking. Nothing in Section 60506 suggests that Congress intended to give the FCC authority to pursue providers for previous deployment decisions.

V.      Conclusion

It is evident that, while the Commission possesses considerable authority to remedy intentional discrimination under Section 60506, its discretion is not without boundaries. Moreover, it should create safeguards to ensure that the complaint process does not excessively burden Commission staff or erect administrative barriers to providers’ efforts to deploy broadband.

Although “income level” is included as a protected category under Section 60506, income can be correlated with such a wide array of variables, which themselves better explain deployment and adoption, that the Commission needs to take care. Trying to construe discrimination on the basis of “income” too broadly will surely generate a large number of false positives, and will lead the Commission astray.

Moreover, Section 60506 employs language directly related to case law centered on “intentional discrimination” and further includes crucial provisions directing the Commission to consider technical and economic feasibility. This legislative framework exists against the backdrop of the Supreme Court’s expanding “major questions” doctrine. With the law and the economics taken together, it is clear that the Commission should not adopt a “disparate impact” test under Section 60506. Moreover, it is crucial to remember that “income” remains a slippery metric to judge, and attempts to use correlational proxies in a discrimination analysis are fraught. As such, claims based on income discrimination should be rooted in bias regarding particular income levels, all else equal. It is critical that Section 60506 not be used as a cudgel against providers as they attempt to balance the opportunity costs of competing deployment opportunities.

The FCC rules should also articulate a presumption of nondiscrimination in which allegations of digital discrimination must be demonstrated, rather than a presumption of discrimination that must be rebutted for each deployment decision. This presumption should furthermore be coupled with adequate safe harbors that allow that Commission to consider defenses based on “technical and economic” feasibility in an expedited manner. Otherwise, given the economic realities discussed above, there is an unacceptably high chance that every one of a provider’s decisions will be subject to challenge, wasting the resources of both the Commission and the providers.

The largest takeaway is that adoption matters quite a bit. Indeed, one of the biggest issues affecting economic feasibility is consumers’ ability and willingness to pay. Moreover, Congress has recognized this reality in its recent legislation. The IIJA’s Broadband Equity and Access program provides more than $42 billion in grants to state programs to help them support providers and give assistance directly to users.[105] The Affordable Connectivity Program provided another $14 billion in funding to help users pay for devices and broadband connections.[106] In our estimation, the Commission stands to do the most good by championing and shepherding programs like these.

If the Commission has good evidence of intentional discrimination in the deployment of broadband, it has a role to play in preventing it. But without strong, compelling evidence of intentional discrimination, the FCC will waste scarce resources chasing bogeymen.

 

[1] Notice of Proposed Rulemaking, Implementing the Infrastructure Investment and Jobs Act: Prevention and Elimination of Digital Discrimination, GN Docket No. 22-69 (Dec. 22, 2022) [hereinafter “NPRM”].

[2] Id. at ¶ 12.

[3] Comments of NCTA, GN Docket No. 22-69 (Feb. 21, 2023), at 4 [hereinafter “NCTA”].

[4] Id. at 6.

[5] Apply for Internet Essentials or Internet Essentials Plus From Comcast, Comcast, https://www.xfinity.com/support/articles/comcast-broadband-opportunity-program (last visited Apr. 19, 2023).

[6] Affordable Connectivity Program, AT&T, https://www.att.com/help/affordable-connectivity-program (last visited Apr. 19, 2023).

[7] Spectrum Internet for Low Income Households, Spectrum, https://www.spectrum.com/internet/spectrum-internet-assist (last visited Apr. 19, 2023).

[8] NPRM, supra note 1 at ¶ 12

[9] See, e.g., Comments of Public Knowledge, Benton Institute for Broadband and Society, and Electronic Privacy Information Center, GN Docket No. 22-69 (Feb. 21, 2023), at 52 (“Congress has again centered the focus of the Commission’s actions on getting all people access, regardless of any discriminatory treatment or intent of the provider.”) [hereinafter “Public Knowledge”]; Letter from David Brody, Lawyers’ Committee for Civil Rights Under Law, to Marlene H. Dortch, Implementing the Infrastructure and Jobs Act: Prevention and Elimination of Digital Discrimination, WC Docket No. 22-69 (Dec. 12, 2022) [hereinafter “Brody”].

[10] See, e.g., Tex. Dep’t of Hous. & Cmty. Affs. v. Inclusive Cmtys. Project Inc., 576 U.S. 519 (2015) [hereinafter “Inclusive Communities”].

[11] See, e.g., Alexander v. Sandoval, 532 U. S. 275, 280 (2001) (“[I]t is… beyond dispute—and no party disagrees—that § 601 prohibits only intentional discrimination.”).

[12] See, e.g., Inclusive Communities, supra note 10 at 533- 34 (“[A]ntidiscrimination laws must be construed to encompass disparate-impact claims when their text refers to the consequences of actions and not just to the mindset of actors, and where that interpretation is consistent with statutory purpose.”); Board of Ed. of City School Dist. of New York v. Harris, 444 U. S. 130 –141 (1979) (considering the context of a statute’s text, history, purpose, and structure in determining whether a statute encompasses disparate impact analysis).

[13] See Section 60506(a)(1), (a)(3).

[14] See, Emergency Coal. to Def. Educ. Travel v. U.S. Dep’t of Treasury, 498 F. Supp. 2d 150, 165 (D.D.C. 2007) (“Courts have repeatedly held that such ‘sense of Congress’ language is merely precatory and non-binding.”), aff’d, 545 F.3d 4 (D.C. Cir. 2008).

[15] Compare 42 U.S. Code § 2000d (“No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.”) with Section 60506(b)(1) (empowering the Commission to create rules taking into account “preventing digital discrimination of access based on income level, race, ethnicity, color, religion, or national origin”) (emphasis added).

[16] See Section 60506(c) (“The Commission and the Attorney General shall ensure that Federal policies promote equal access to robust broadband internet access service by prohibiting deployment discrimination…”).

[17] West Virginia v. EPA, 142 S. Ct. 2587, 2607–2608 (2022); Util. Air Regul. Grp. (UARG) v. EPA, 573 U.S. 302, 324 (2014).

[18] Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 468 (2001).

[19] Broadband Equity, Access, and Deployment Program, BroadbandUSA, https://broadbandusa.ntia.doc.gov/resources/grant-programs/broadband-equity-access-and-deployment-bead-program (last visited Oct. 23, 2022).

[20] Affordable Connectivity Program, Federal Communications Commission, https://www.fcc.gov/acp (last visited Oct. 23, 2022).

[21] NPRM, supra note 1 at ¶24.

[22] NOI Reply Comments of AT&T, GN Docket No. 22-69 (Jun. 30, 2022), (“In particular, like all companies operating in a competitive marketplace, broadband providers must and do take expected demand into account, and the ‘economic feasibility’ qualifier protects their right to do so.”)

[23] Telecommunications: Broadband Deployment Is Extensive Throughout the United States, but It Is Difficult to Assess the Extent of Deployment Gaps in Rural Areas, U.S. Gov’t Accountability Off., GAO-06-426 (May 2006), https://www.gao.gov/assets/gao-06-426.pdf. [hereinafter “GAO-06-426”].

[24] Brian Whitacre & Roberto Gallardo, State Broadband Policy: Impacts on Availability, 44 Telecomm. Pol’y. 102025 (2020).

[25] Tonny J. Oyana, Exploring Geographic Disparities in Broadband Access and Use in Rural Southern Illinois: Who’s Being Left Behind?, 28 Gov’t. Info. Q. 252 (2011).

[26] GAO-06-426, supra note 23.

[27] Id.

[28] Whitacre & Gallardo, supra note 24.

[29] Juan Rendon Schneir & Yupeng Xiong, A Cost Study of Fixed Broadband Access Networks for Rural Areas, 40 Telecomm. Pol’y. 755 (2016).

[30] GAO-06-426, supra note 23.

[31] Brian Whitacre, Sharon Strover, & Roberto Gallardo, How Much Does Broadband Infrastructure Matter? Decomposing the Metro–Non-Metro Adoption Gap with the Help of the National Broadband Map, 32 Gov’t Info. Q. 261 (2015).

[32] Broadband: National Strategy Needed to Guide Federal Efforts to Reduce Digital Divide, U.S. Gov’t Accountability Off., GAO-22-104611 (May 31, 2022) [hereinafter “GAO-22-104611”].

[33] Id. See also, How Do Speed, Infrastructure, Access, and Adoption Inform Broadband Policy?, Pew Research Center (Jul. 7, 2022), https://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2022/07/how-do-speed-infrastructure-access-and-adoption-inform-broadband-policy (“nearly 1 in 4 Americans do not subscribe to a home broadband connection, even where one is available”).

[34] 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://www.ntia.doc.gov/blog/2022/new-analysis-shows-offline-households-are-willing-pay-10-month-average-home-internet.

[35] Kenneth Flamm & Anindya Chaudhuri, An Analysis of the Determinants of Broadband Access, 31 Telecomm. Pol’y. 312 (2007).

[36] Id.

[37] Victor Glass & Stela K. Stefanova, An Empirical Study of Broadband Diffusion in Rural America, 38 J. Reg. Econ. 70 (Jun. 2010).

[38] Christopher G. Reddick, Roger Enriquez, Richard J. Harris, & Bonita Sharma, Determinants of Broadband Access and Affordability: An Analysis of a Community Survey on the Digital Divide, 106 Cities 102904 (2020).

[39] Glass & Stefanova, supra note 37 at 70.

[40] GAO-22-104611, supra note 32.

[41] Alison Powell, Amelia Bryne, & Dharma Dailey, The Essential Internet: Digital Exclusion in Low-Income American Communities, 2 Pol’y & Internet 161 (2010).

[42] Oyana, supra note 25.

[43] GAO-06-426, supra note 23.

[44] GAO-22-104611, supra note 32.

[45] NPRM, supra note 1 at ¶ 66.

[46] See, e.g., Notice of Inquiry, Implementing the Infrastructure Investment and Jobs Act: Prevention and Elimination of Digital Discrimination, GN Docket No. 22-69 (2022) (“If underlying cost or geographic hurdles exist in conjunction with demand in an area that makes it unprofitable, how should the Commission address such a situation?”).

[47] Public Knowledge, supra note 9 at 45 (“In many cases, a provider has the choice to build out and provide service in one area, or another. It will likely choose to build out in the more profitable area, even if it could break even or turn a profit serving the other, as well.”)

[48] See, e.g., N. Gregory Mankiw, Principles of Microeconomics, 9^th ed. (2021) (“The opportunity cost of an item is what you give up to get that item. When making any decision, decision makers should take into account the opportunity costs of each possible action.”).

[49] Public Knowledge, supra note 9 at 45 (“determinations of economic feasibility also cannot take into account opportunity costs”).

[50] NPRM, supra note 1 at ¶ 66.

[51] Id.

[52] 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.

[53] Declaration for Glenn Woroch, NOI Reply Comments of AT&T, supra note 22.

[54] T. Randolph Beard & George S. Ford, Digital Discrimination: Fiber Availability and Speeds, by Race and Income, Phoenix Ctr. for Advanced Legal & Econ. Pol’y Stud., Phoenix Ctr. Pol’y Paper No. 58 (Sep. 2022), https://phoenix-center.org/pcpp/PCPP58Final.pdf.

[55] Garson O’Toole, If You Torture the Data Long Enough, It Will Confess, Quote Investigator (Jan. 18, 2021), https://quoteinvestigator.com/2021/01/18/confess.

[56] Comments of CEI, GN Docket No. 22-69 (Feb. 21, 2023), at 8.

[57] NPRM, supra note 1 at ¶ 12.

[58] Public Knowledge, supra note 9 at 52 (“Congress has again centered the focus of the Commission’s actions on getting all people access, regardless of any discriminatory treatment or intent of the provider.”); see also, Brody, supra note 9.

[59] Ricci v. DeStefano, 557 U.S. 557, 577 (2009) [hereinafter “Ricci”].

[60] Id. (Intentional discrimination cases “present the most easily understood type of discrimination…[that] occur[s] where [a party[ has treated [a] particular person less favorably than others because of a protected trait.”).

[61] Inclusive Communities, supra note 10 at 528–29.

[62] See Public Knowledge, supra note 9 at 50-53.

[63] Id. at 5-40.

[64] See Section 60506(a)(1), (a)(3).

[65] See, Emergency Coal. to Def. Educ. Travel v. U.S. Dep’t of Treasury, 498 F. Supp. 2d 150, 165 (D.D.C. 2007) (“Courts have repeatedly held that such ‘sense of Congress’ language is merely precatory and non-binding.”), aff’d, 545 F.3d 4 (D.C. Cir. 2008).

[66] See Section 60506(c) (“The Commission and the Attorney General shall ensure that Federal policies promote equal access to robust broadband internet access service by prohibiting deployment discrimination…”).

[67] 167 Cong. Rec. 6046 (2021).

[68] 167 Cong. Rec. 6053 (2021).

[69] See, e.g., West Virginia v. EPA, 142 S. Ct. 2587 (2022); Util. Air Regul. Grp. (UARG) v. EPA, 573 U.S. 302 (2014).

[70] West Virginia v. EPA, 142 S. Ct. at 2607–2608; UARG, 573 U.S. at 324.

[71] Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 468 (2001).

[72] Inclusive Communities, supra note 10 at 534.

[73] 42 U.S.C. § 3604(a) (emphasis added).

[74] Inclusive Communities, supra note 10 at 534.

[75] Id.

[76] Id. at 534-35.

[77] Alexander v. Sandoval, 532 U.S. 275, 280 (2001).

[78] 42 U.S.C. §2000d (emphasis added).

[79] Public Knowledge, supra note 9 at 54.

[80] Inclusive Communities, supra note 10 at 533 (emphasis added).

[81] Id. at 521–22 (“Courts should avoid interpreting disparate-impact liability to be so expansive as to inject racial considerations into every housing decision. These limitations are also necessary to protect defendants against abusive disparate-impact claims.”).

[82] Id.

[83] Section 60506 (emphasis added).

[84] Ricci, supra note 59 at 557.

[85] NCTA, supra note 3 at 21.

[86] 429 U.S. 252, 266-67 (1977).

[87] Id. at 265 (“Proof of racially discriminatory intent or purpose is required to show a violation of the Equal Protection Clause.”).

[88] Id. at 266.

[89] Id. at 266-67.

[90] Id. at 267.

[91] Id. at 268.

[92] See, Texas Dep’t of Cmty. Affs. v. Burdine, 450 U.S. 248, 258–59 (1981). Note that the last two factors listed in this and the subsequent footnote are part of the McDonnell Douglas framework, McDonnell Douglas Corp. v. Green, 411 U.S. 792, 798, 93 S. Ct. 1817, 1822, 36 L. Ed. 2d 668 (1973). Technically, the Arlington factors are generally used when analyzing group discrimination and the McDonnell Douglas factors are used when analyzing discrimination against individuals. Section 60506 might, however, be plausibly read as permitting either approach to intentional discrimination in deployment decisions.

[93] See, Reeves v. Sanderson Plumbing Prod. Inc., 530 U.S. 133, 143–44 (2000).

[94] US Dep. of Justice, Title VI Legal Manual: Proving Discrimination – Intentional Discrimination, https://www.justice.gov/crt/fcs/T6Manual6 (“While statistical evidence is not required to demonstrate intentional discrimination, plaintiffs often successfully use statistics to support, along with other types of evidence, a claim of intentional discrimination.”).

[95] NPRM, supra note 1 at ¶ 35-36.

[96] Indeed, as NCTA notes in its comments, a safe harbor of this kind would give effect to Congress’ requirement that the FCC acknowledge constraints on deployment relating to “technical or economic feasibility.” NCTA, supra note 3 at 25-30.

[97] See, e.g., Comments of T-Mobile, GN Docket No. 22-69 (Feb. 21, 2023), at 30-31.

[98] Comments of USTelecom, GN Docket No. 22-69, (Feb. 21, 2023), at 33-34.

[99] Id.

[100] NPRM, supra note 1 at ¶ 52.

[101] Section 60506(a)(2).

[102] NPRM, supra note 1 at ¶ 76.

[103] These possibilities open the door for what public-choice economists call “rent extraction,” whereby public officials use the ability to control entry into a market for their own benefit. See Fred McChesney, Money for Nothing: Politicians, Rent Extraction, and Political Extortion (1997). See also, ICLE Ex Parte on Sec. 621, MB Docket No. 05-311 (Jul. 18, 2019), available at https://laweconcenter.org/wp-content/uploads/2019/07/ICLE-Comments-on-Implementation-of-Section-621a1-of-the-Cable-Communications-Policy-Act-of-1984.pdf (arguing that local and state franchising authorities often abuse their authority to get in-kind contributions from cable providers far beyond the 5% cost limit).

[104] NPRM, supra note 1 at ¶ 92.

[105] Broadband Equity, Access, and Deployment Program, BroadbandUSA, https://broadbandusa.ntia.doc.gov/resources/grant-programs/broadband-equity-access-and-deployment-bead-program (last visited Oct. 23, 2022).

[106] Affordable Connectivity Program, Federal Communications Commission, https://www.fcc.gov/acp (last visited Oct. 23, 2022).

The following may be attributed to Geoffrey Manne, Executive Director, ICLE

Today, Federal Communications Commission Chairman Ajit Pai announced the restoration of the Commission’s historically light-touch, pro-innovation approach to regulating broadband Internet access services. The full text of the Restoring Internet Freedom Order will be available to the public here tomorrow.

Chairman Pai’s proposed Order rescinds the misguided 2015 Open Internet Order and reasserts the primacy of competition and consumer protection laws to govern conduct by Internet providers, just as they do everywhere else in the economy.

As Chairman Pai puts it:

“[A]s a result of my proposal, the Federal Trade Commission will once again be able to police ISPs, protect consumers, and promote competition, just as it did before 2015. Notably, my proposal will put the federal government’s most experienced privacy cop, the FTC, back on the beat to protect consumers’ online privacy.”

Consumers are not left without government oversight. Not only does the Order return authority to the FTC, it also requires ISPs to disclose how they will treat traffic and be held accountable for any deviation from their claims. As under Section 5 of the FTC Act, deceptive disclosures or unfair practices — practices that have the actual effect of harming consumers — will be subject to FTC enforcement.

As Chairman Pai describes the proposed rules in today’s op-ed:

“[T]he FCC simply would require internet service providers to be transparent so that consumers can buy the plan that’s best for them. And entrepreneurs and other small businesses would have the technical information they need to innovate…. Instead of being flyspecked by lawyers and bureaucrats, the internet would once again thrive under engineers and entrepreneurs.”

Chairman Pai must be commended for the process by which he has introduced the new rules. Today he shares his proposed rules with his fellow commissioners and tomorrow he will release the full text of the rules to the public, a full three weeks before the Commission will vote on them.

Sadly, this has not been the norm. Rather, since the 1970s the Commission has voted on proposed rules without public disclosure of the text until an undetermined time after the vote.

The last time around, under Chairman Wheeler, the text of the Open Internet Order wasn’t released until 14 days after the vote, and the Order itself had undergone a complete transformation from NPRM to Order.

Nothing about that process was open or transparent, and, not surprisingly, the 2015 Order evinces virtually no consideration of opposing views or rigorous analysis of complex and controversial issues.

Chairman Pai has changed all of that, and followed basic rules of good governance that actually facilitate discussion and debate over the proposed regulations.

A fuller analysis of Chairman Pai’s proposed Order will have to await its release (and the wearing off of the stultifying effects of L-Tryptophan and over-indulgence). But it seems clear that the Chairman’s office has taken a careful, rigorous, and humble approach to fixing the regulatory mess of the 2015 OIO.

Selected ICLE work on this issue:

• ICLE Notice of Ex Parte on Restoring Internet Freedom, here
• ICLE Economics and Policy Comments on Restoring Internet Freedom, here
• ICLE Privacy Comments on Restoring Internet Freedom, here
• US Telecom v. FCC, US Supreme Court Amicus of ICLE and affiliate Gus Hurwitz, here
• The Feds Lost on Net Neutrality, But Won Control of the Internet, Wired, here
• Net Neutrality’s Hollow Promise to Startups, Computerworld, here
• Since When Is Free Web Access a Bad Thing? The Wall Street Journal, here
• How to Break the Internet, Reason Magazine, here
• Net Neutrality is Bad for Consumers and Probably Illegal, Truth on the Market, here
• Court strikes down Net neutrality rules but grants FCC sweeping new power over Internet, Truth on the Market, here
• Thirty-two Scholars of Law and Economics Urge the FTC to Advise the FCC to Employ Case-by-Case Rules in Regulating Net Neutrality, Letter to the FTC , here

About ICLE:

The International Center for Law & Economics is a nonprofit, nonpartisan research center. Working with a roster of more than fifty academic affiliates and research centers from around the globe, we develop and disseminate academic output to build the intellectual foundation for rigorous, economically-grounded policy.

In 1914, Congress gave the FTC sweeping jurisdiction and broad powers to enforce flexible rules to ensure that it would have the ability to serve as the regulator of trade and business that Congress intended it be. Much, perhaps even the great majority, of what the FTC does is uncontroversial and is widely supported, even by critics of the regulatory state. However, both Congress and the courts have expressed concern about how the FTC has used its considerable discretion in some areas. Now, as the agency approaches its 100th anniversary, the FTC, courts, and Congress face a series of decisions about how to apply or constrain that discretion. These questions will become especially pressing as the FTC uses its authority in new ways, expands its authority into new areas, or gains new authority from Congress.

Download these Comments