The Truth about Title II

The FCC isn’t proposing to reclassify “broadband service,” they are proposing to reclassify the transmission component of broadband Internet access services. Pure “broadband services” are already classified as Title II services. In addition, the FCC isn’t proposing to reclassify broadband access as a “phone service.” Title II is about all two-way communications services, not just phone services.

The Supreme Court has already said that the interpretation now proposed by the FCC is consistent with the Act. So if Congress disagrees with the FCC’s choice, they need to pass a new law, and not simply write letters to the FCC telling the agency that it cannot act when Congress has already said that it can.

They did not conclude that “broadband” is an information service. They concluded that broadband Internet access services combines an information service with a telecommunications service, but that they are integrated fully, and there is no separate “offering” of a telecommunications service. “Broadband” is a transmission medium, that is today classified as a Title II service when offered to enterprise clients.

The Supreme Court held that classifying residential broadband Internet access service as an integrated information service without a separable telecommunications component was one reasonable interpretation of the Telecommunications Act. It did not foreclose an interpretation that residential broadband Internet access contains a separable telecommunications service component. In fact, three justices dissented, holding that the FCC got it wrong in 2002.

In recent new reports in the Wall Street Journal and SNL Kagan, the top executives at Verizon and Comcast say that Title II reclassification will have no impact on their plans to invest in networks.

AT&T is loath to mention that it made considerable network investment when it had to abide by Net Neutrality conditions, and invested considerably less when it didn’t. As a requirement of its 2006 merger with BellSouth, AT&T agreed to operate a neutral network. AT&T’s network investments increased immediately following the imposition of the Net Neutrality merger condition and continued to rise over the two years of the merger agreement. When the neutrality condition expired on Dec. 29, 2008, the company sharply reduced its investment.

According to a recent economic study by NYU’s Institute for Policy Integrity, Net Neutrality “produces billions of dollars of free value for the American public.” The study also found that "targeted government support for ISPs to expand access where needed, along with Net Neutrality rules to protect content providers, are the best combination of policies for overcoming the market failure of under-investment in the Internet."

A Title II classification for broadband Internet access services would give the FCC broader authority to realize the goal of universal access set forth in its national broadband plan. This would provide more jobs for more Americans. A 2007 study by the Brookings Institution and MIT estimated that a one-digit increase in U.S. per-capita broadband penetration equates to an additional 300,000 jobs. If our broadband penetration were as high as a country like Denmark, we could expect approximately 3.2 million additional U.S. jobs.

During the years following the imposition of the Title II standard on incumbent phone companies as stipulated in the 1996 Telecom Act, investment as a percentage of revenue by these companies rose from nearly 20 percent before the enactment of the law to a high of 28 percent in 2001. They actively hired workers to coincide with the increased investment. In the years following the dismantling of this FCC authority over Internet access, relative investment levels declined – reaching below 17 percent by 2008. Recent layoffs by phone and cable companies have numbered in the tens of thousands.

Congress stated in Section 706 that the FCC, “with regulatory jurisdiction over telecommunications services shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans,” defining “advanced telecommunications capability” as “broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology." Section 706 tells the FCC to encourage this deployment by using "price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment."

FCC reclassification is not straying from anything. It is merely putting the FCC’s now debunked legal regulatory framework back in harmony with congressional law. The FCC is now going to stay true to the law, reversing its past mistakes which went beyond the law. Congress can step in if it likes, but the FCC is merely restoring the framework Congress dictated when it last weighed in on this issue.