The Last Thing That Stands In The Way Of Net Neutrality Legislation

Fresh capital expenditure figures for Internet service providers are out, so that means we have another chance to endlessly debate the wisdom of regulating broadband access providers as common carriers! Yay!

The question of the appropriate source of legislative authority with which to regular broadband providers has diverted attention from the more relevant policy question of how to regulate broadband providers. And for that policy question, we have a fairly strong consensus. The sooner we leave the false choice of Title I versus Title II-based rules, the sooner we resolve the net neutrality debate.

An analysis in the Financial Times on Thursday suggests that broadband industry capital expenditures (capex) declined in 2018 by 0.4 percent.

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This news was celebrated by proponents of the FCC’s 2015 Open Internet Order, which classified Internet service providers (ISPs) as common carriers. According to their logic, “The findings call into question one of the main arguments the industry used in its successful campaign to have the Federal Communications Commission overturn the Obama-era net neutrality regulations…” Opponents of Title II-based authority but not of net neutrality rules, your fearless blogger included, have argued that capital formation was impaired by the 2015 Order.

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But the FT analysis looked at only the top four broadband providers—AT&T, Verizon, Charter and Comcast—and it considered the entirety of their capital expenditures as opposed to their broadband-related expenditures.

A dueling analysis released by trade association USTelecom on the same day suggests that broadband capex across the top six ISPs, including wireless carriers Sprint and T-Mobile, increased by 3.6 percent in 2018. [Disclosure: I have submitted testimony on behalf of USTelecom in several proceedings at the FCC.] Sprint and T-Mobile account for $1.8 billion of USTelecom’s estimated $2.3 billion net increase across the six providers, which implies that even among the same four carriers analyzed by FT, USTelecom estimates a modest increase in capex.

What gives? The discrepancy appears to be that USTelecom excludes the cable programming arm of Comcast (NBCU) and includes AT&T’s expenditure on FirstNet, the carrier’s public-safety broadband network dedicated to police, firefighters, and emergency medical services. While FT notes the sizeable increase in Sprint’s capital expenditures on its networks in the body of its story, this increase curiously was not included in FT’s summary table or headline. I understand that author of the FT report reached out to USTelecom prior to publication, but USTelecom’s survey was not available at that time.

Granted, USTelecom serves as the trade association for carriers with an interest in the fate of Internet regulation. But the benefit of leaning on USTelecom’s survey is that it has a long history dating back to 2011, which allows for consistent comparisons across time. Moreover, in his last speech as Chairman of the FCC, Tom Wheeler cited USTelecom’s survey of broadband capex as the gold standard.

And what is that history? Per USTelecom’s time series, broadband capex across all ISPs (not just the top four or six) declined significantly from 2014 to 2016 (by roughly $3 billion), which coincides with Wheeler’s classification of ISPs as common carriers. In 2017, broadband capex increased by roughly $1.5 billion, which coincides with the repeal of Title II-based regulations. This is hardly proof that Title II caused broadband capex to fall, but the coincidence is very unfortunate for Title II defenders.

Fortunately, there is no special nexus between Title II and net neutrality. It is simply one way among several to authorize the FCC to enforce net neutrality regulations. The DC Circuit in Verizon signaled another way under section 706, which involved putting the burden of proof on edge providers rather than ISPs. And Congress could provide a third way by authorizing the FCC to regulate broadband providers under a new title of the Communications Act.

As former Wheeler policy advisor Gigi Sohn tweeted during the net neutrality hearing last week: “Hey @RepDarrenSoto, any legislation must include, at a minimum, all of the protections of the 2015 Open Internet order & #netneutrality rules. This includes reinstating @FCC authority 2 oversee the broadband market. It can be Title VII, Title X or Title 500.” (emphasis added).

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Sohn clearly gets it. And several Republicans on the communications and technology subcommittee signaled strongly that they were ready to codify net neutrality rules outside of the Title II framework. This seems like an important development in the net neutrality wars.

Notwithstanding the views of certain libertarians who think the market (or the FTC’s consumer protection rules) can solve all problems, there is a consensus in the policy community about how to regulate broadband operators: We need bright-line rules to police blatant forms of discrimination, such as blocking and throttling, and we need a standard to deal with milder forms of discrimination that may be good or bad for competition.

Both the 2010 and 2015 flavors of net neutrality regulation reflected this policy consensus. The only difference is that the 2010 Order leaned on a nondiscrimination standard to assess paid priority arrangements, and the 2015 Order used an Internet conduct standard to assess zero-rating plans.

A carrot that can be added to a Title II-free net neutrality compromise is a private right of action. This would allow edge providers who feel like they have been discriminated against to bring a complaint to the FCC’s Administrative Law Judge. That way, not all future enforcement would run through the Chairman’s office—some Chairs might not support the new rules.

It’s long past time to end the net neutrality debate. The faster policymakers remove Title II from the conversation, the faster we will get to the finish line.

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