The Truth about Title II

The Democratic leadership of both the House and Senate Commerce Committees have called upon the FCC to reassert its authority to protect an open Internet and achieve universal broadband access. These two initiatives are also key priorities of the Obama Administration.

There is no legal uncertainty about the FCC’s authority to classify the transmission component of Internet access service as a Title II service. In 2005, the Supreme Court held that the agency had the discretion to make this policy choice.

In 1998, the Clinton-era FCC affirmed the 1996 Act's general deregulatory stance towards web content and non-facilities based dial-up ISPs. It explicitly left cable broadband ISPs in policy limbo and left the door open to their transmission services being treated as Title II telecommunications. However, DSL ISPs were already and continued to have their transmission facilities be treated as Title II telecommunications services until the Bush-era FCC classified DSL ISPs as information services in 2005. So it is a myth to paint the 1998 policy as the same as the Bush FCC policy.

AT&T is loath to mention that it made considerable network investments 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 following two years. When the neutrality condition expired on Dec. 29, 2008, the company sharply reduced its investment.

During the years following the imposition of the Title II standard on incumbent phone companies offering broadband service 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 the FCC's authority over Internet access, relative investment levels declined – plummeting below 17 percent by 2008. Recent layoffs by phone and cable companies have numbered in the tens of thousands.

High-speed Internet users in the U.S. suffer from a lack of choice in the marketplace. According to data in the FCC’s national broadband plan, 5 percent of households have no wireline providers; 13 percent of households have one, and 78 percent have just two wireline providers. In other words, 96 percent of the country has two or fewer choices for wired broadband.

Americans are paying a whole lot more and getting a whole lot less of the Internet speeds that we deserve. U.S. broadband speeds average about 4 to 5 megabits per second (Mbps) when downloading and 1 Mbps when uploading. That’s a fraction of the download speeds available to users in other countries. For example, Japanese internet users accustomed to surfing the Web at speeds of 100 Mbps at the same prices Americans pay for access to the slow lane. In Hong Kong, one provider now offers a 100 Mbps connection for $13 a month.

Indeed, much work needs to be done. Last year, President Obama and Congress tasked the FCC to lead efforts to do it. The National Broadband Plan released by the agency in March was the agency's response and a positive step in that direction. This letter, however, scuttles these efforts. By urging the FCC not to re-assert it's authority over broadband access services, the signers are effectively saying "much remains to be done to improve broadband access, affordability and speed, but we want to stop you from doing it."

The April 6 decision by the DC Circuit Court of Appeals demonstrated that the “regulatory environment” was anything but “stable.” The court's decision implies that the FCC lacks the authority to implement many of the recommendations of its National Broadband Plan. In order to regain that authority, FCC Chairman Julius Genachowski has proposed a "third way" -- classifying residential broadband transmission as a telecommunications service so that the FCC can protect an open Internet and promote universal access. This letter recommends maintaining the regulatory limbo that created this mess.

Nothing could be further from the truth. Reasserting the FCC’s authority is integral to restoring its authority to “bring broadband to every corner of America, get every American online, and provide the high speed connections needed to realize the promises of telemedicine, distance learning, and other forms of consumer empowerment." Just ask Austin Schlick, General Counsel of the FCC.

Ironically, the policy priorities identified in this letter will be impossible for the FCC even to pursue without a shift to Title II. Under the current regulatory framework, the FCC has no power to promote universal affordable access to broadband or meaningfully empower consumers to make choices among broadband providers.

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."

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 investment in networks.

The Supreme Court has already said that the interpretation now proposed by the FCC is consistent with the 1996 Telecommunications Act. So if Congress disagrees with the FCC’s choice, it needs to pass a new law. But this letter implies that the FCC doesn't have the authority to act, when Congress and the Supreme Court have already said that it could.

Again, in recent new reports in the Wall Street Journal and SNL Kagan, the top executives at Verizon and Comcast say that the Third Way will have no impact on investment in networks.

A Title II classification for the transmission component of 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.