Tales of the Sausage Factory

NCTA Agrees Title II Virtuous Cycle Totally Working; Or, Pai’s Economics v. the Actual Real World.

Last week, NCTA, the trade association for the industry formerly known as cable, posted this amazing graph and blog post showing that the “virtuous cycle” the FCC predicted would happen when it adopted the open Internet rules (aka Net Neutrality) back in December 2010. Indeed, as the NCTA graph (based on the latest Akamai State of the Internet Report) shows, the average speed of broadband connections has not only continued to rise since the FCC first adopted net neutrality rules in 2010, but the rate of increase has accelerated since the FCC adopted the Title II Reclassification Order in February 2015. Finally, as NCTA also points out, in the approximately 10 years since the FCC first began to enforce net neutrality through the “Internet Policy Statement” and the Comcast/Bittorrent Complaint, the cost of moving bits from their source to your home has dropped 90% on a per bit basis. (Whether we are actually still paying too much because of our lack of competition in the broadband market is something of a different question.)

 

Perhaps unsurprisingly, this matches the findings from Free Press’ Dr. Erik Turner in this massive and meticulously documented report, “Broadband Investments And Where To Find Them.” But it’s still nice to see NCTA confirm it. One of the advantages of having blogged on net neutrality for 10 years is I can point to things like this 2006 blog post and say: “Hey, I totally predicted that. Glad to see things working as I predicted they would.” This contrasts with the net neutrality haters, who as far back as 2006 that predicted that preventing ISPs from discriminating and prioritizing traffic would result on average broadband quality getting consistently worse a bandwidth kept treating the Internet “like a truck you can just load things on” instead “of a series of tubes.”

 

 

So why did the self-appointed experts get it so wrong? And why do they still fixate on criteria like “ISP CAPEX” that neither Congress nor anyone outside the economics world cares about (and which a reviewing court utterly will not give a crap about) if better faster broadband is getting deployed as we all predicted and Congress directed?

 

 

The answer boils down to the old cliche: “Among economists, the real world is often a special case.” So while all of us out here in the real world focus on things like “hey, is broadband actually getting deployed, and is it getting better and faster and stuff so we can do all the things that make better faster broadband so critical in everyone’s lives these days,” economists poo-poo such concerns as being part of an “economics free zone.” Questioning this navel gazing in Econ Cloud Cuckoo Land will evoke sneers about how silly you must be for not understanding why the actual real world is irrelevant to the purity and wonderfulness of “real” economics. For some odd reason, a lot of folks eat this superior attitude up with a spoon and fail to ask the follow up question like “you know you didn’t actually address the substance of the argument, right?”

 

Anyway, I will below unpack all of this by: (a) reviewing what we actually predicted about the virtuous cycle; (b) reminding folks about the predictions of doom and gloom from the haters in Econ Cloud Cuckoo Lad (that’s a literary reference, btw, for when the usual suspects want to get all fake outragey to avoid dealing with substance); (c) reviewing why the evidence is consistent with the pro-Net Neutrality prediction and falsifies the anti-Net Neutrality prediction; and (d) why this means that if Pai tries to base his roll back of Title II/net neutrality by embracing the Singer/USTA CAPEX argument and ignoring all the other evidence, he is going down in flames in the D.C. Circuit.

 

(I would love include a section on what ISP CAPEX actually should look like, which casts further doubt on the question of the relevancy of any modest drop in ISP CAPEX over time as a useful measure, but I’m gonna have to save that for a later follow up.)

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Tales of the Sausage Factory

Will Pai “Pull A Putin” And Hack the FCC Process? Or Will He Get Over Himself and Start Acting Like The Chairman?

In my 20+ years of doing telecom policy, I have never seen a Chairman so badly botch a proceeding as Chairman Ajit Pai has managed to do with his efforts to repeal Net Neutrality. For all the fun that I am sure Pai is having (and believe me, I understand the fun of getting all snarky on policy), Pai’s failure to protect the integrity of the process runs the serious risk of undermining public confidence in the Federal Communications Commission’s basic processes, and by extension contributing to the general “hacking of our democracy” by undermining faith in our most basic institutions of self-governance.

 

Yeah, I know, that sounds over the top. I wish I didn’t have to write that. I also wish we didn’t have a President who calls press critical of him “the enemy of the American people,” triggering massive harassment of reporters by his followers. What both Trump and Pai seem to fail to understand is that when you are in charge, what you say and do matters much more than what you said and did before you were in charge. You either grow up and step into the challenge or you end up doing serious harm not only to your own agenda, but to the institution as a whole. Worse, in a time when the President and his team actually welcomed Russia’s “hacking” of our election, and remain under suspicion for coordinating with Russia for support, Pai’s conduct creates concern and distrust that he will also “pull a Putin” by welcoming (or worse, collaborating with) efforts to de-legitimize the FCC’s public comment system and hack the public debate around net neutrality generally.

 

Fortunately, as I told former Democratic FCC Commissioner Julius Genachowski when he was in danger of making the FCC’s process a laughingstock in the public eye, Pai can still recover and rescue himself and the FCC from his self-destructive conduct. Instead of calling his critics enemies of capitalism and free speech, instead of obsessing about his own hurt feelings while displaying a troubling indifference to identity stealing bots filing comments that support his own proposal and failing to follow up on his own claims that the FCC comment system suffered a critical cyber-attack – Pai needs to follow in the footsteps of Michael Powell, Kevin Martin and Tom Wheeler when they faced similar insults (and in Powell’s case, racial slurs). Welcome robust public debate and criticism, condemn the actually illegal hacking used by his supporters, and stop whining about his own hurt feelings. Michael Powell managed to take being called a War Criminal and son of a war criminal for supposedly allowing the press to sell us on the Iraq War, as well as the same kind of racist bullshit that Pai or any other prominent person of color sadly has to endure in an America where racists feel increasingly emboldened. Pai can chose to step up in the same way his Republican and Democratic predecessors did, or continue to contribute to the overall erosion of trust in our institutions of self-governance generally and his handling of the FCC specifically.

 

I unpack all this below . . .

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Tales of the Sausage Factory

Is Net Neutrality (And Everything Else) Not Dead Yet or Pining For the Fjords? Contemplating Trump’s Telecom Policy.

The election of Donald Trump has prompted great speculation over the direction of telecom policy in the near future. Not surprisingly, everyone assumes that the primary Republican goal will be to completely roll back net neutrality and just about every other rule or policy adopted by the Wheeler FCC — perhaps even eliminating the FCC altogether or scaling back it’s authority to virtual non-existence. Why not? In addition to controlling the White House, Republicans have majorities in the Senate and the House.  Jeff Eisenach, the head of Trump’s FCC transition team (now called “Landing Teams”), has been one of the harshest critics of the FCC under both Wheeler and Genachowski. So it is unsurprising to see a spate of articles and blog posts on the upcoming death of net neutrality, broadband privacy, and unlicensed spectrum.

 

As it happens, I have now been through two transitions where the party with the White House has controlled Congress. In neither case have things worked out as expected. Oh, I’m not going to pretend that everything will be hunky-dory in the land of telecom (at least not from my perspective). But having won things during the Bush years (expanding unlicensed spectrum, for example), and lost things in the Obama years (net neutrality 2010), I am not prepared to lay down and die, either.

 

Telecom policy — and particularly net neutrality, Title II and privacy — now exists in an unusual, quantum state that can best be defined with reference to Monty Python. On the one hand, I will assert that net neutrality is not dead yet. On the other hand, it may be that I am simply fooling myself that net neutrality is simply pining for the fjords when, in fact, it is deceased, passed on, has run up the curtain and joined the choir invisible.

 

I give my reasons for coming down on the “not dead yet” side — although we will need to work our butts off to keep from getting clopped on the head and thrown into the dead cart. I expect the usual folks will call me delusional. However, as I have said a great deal over the years: “If I am delusional, I find it a very functional delusion.”

 

More below . . . .

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Tales of the Sausage Factory

Ninth Circuit Knee-Caps Federal Trade Commission. Or: “You Know Nothing, Josh Wright.”

Back in October 2014, before the Federal Communications Commission (FCC) reclassified as Title II, both the FCC and the Federal Trade Commission (FTC) brought complaints against AT&T Mobility for failure to disclose the extent they throttled “unlimited” customers once they passed a fairly low monthly limit. You can see the FCC Notice of Apparent Liability (NAL) here. You can see the FTC complaint, filed in the district court for Northern California, here (press release here). As some of you may remember, the FCC was still debating whether or not to reclassify broadband as a Title II telecom service.  Opponents of FCC reclassification (or, indeed, of any FCC jurisdiction over broadband) pointed to the FTC enforcement action as proof that the FTC could handle consumer protection for broadband and the FCC should avoid exercising jurisdiction over broadband altogether.

 

In particular, as noted in this Washington Post piece, FTC Commissioner Maureen Olhausen (R) and then-FTC Commissioner Joshua Wright (R), both vocal opponents of FCC oversight of broadband generally and reclassification specifically, tweeted that the FTC complaint showed the FTC could require broadband providers to keep their promises to consumers without FCC net neutrality rules. Wright would subsequently reiterate this position in Congressional testimony, pointing to the FTC’s enforcement complaint under Section 5 of the Federal Trade Commission Act (FTCA) (15 U.S.C. 45) as an “unfair and deceptive” practice to prove that the FTC could adequately protect consumers from potential harms from broadband providers.

 

Turns out, according to the Ninth Circuit, not so much. As with so much the anti-FCC crowd asserted during the net neutrality debate, this turns out (pending appeal) to be dead wrong. Why? Contrary to what some people seem to think, most notably the usual suspects at Cable’s Team Rocket (who are quoted here as saying “reclassifying broadband means the FTC can’t police any practices of common carriers, at least in the Ninth Circuit” which is either an utterly wrong reading of the case or an incredibly disingenuous remark for implying that reclassification had something to do with this decision. You can see their full press release, which borders on the Trump-esque for its incoherence, here.)

 

As I explain below, the Ninth Circuit’s decision did not rest on reclassification of broadband. To the contrary, the court made it explicitly clear that it refused to consider the impact of reclassification because, even assuming mobile broadband was not a Title II service, AT&T Mobility is a “common carrier” by virtue of offering plain, ordinary mobile voice service (aka “commercial mobile radio service,” aka CMRS). The Ninth Circuit agreed with AT&T that because AT&T offers some services as common carrier services, AT&T Mobility is a “common carrier” for purposes of Section 5(a)(2) of the FTCA and thus exempt from FTC enforcement even for its non-common carrier services.

 

Given that Tech Freedom and the rest of the anti-FCC gang wanted this case to show how the Federal Trade Commission could handle all things broadband, I can forgive — and even pity — Tech Freedom’s desperate effort in their press release to somehow make this the fault of the FCC for reclassifying and conjuring an imaginary “gap” in broadband privacy protection rather than admit Congress gave that job to the FCC. After all, denial is one of the stages of grief, and it must come as quite a shock to Cable’s Team Rocket to once again see that Team PK-chu was right after all (even if it doesn’t make me particularly happy that we were, for reasons I will explain below). But this is policy, not therapy.  As of today, instead of two cops on the beat for broadband consumer protection access, we have one — the Federal Communications Commission. Fortunately for consumers, the FCC has been taking this job quite seriously with both enforcement actions and rulemakings. So while I consider it unfortunate that Ninth Circuit has cut out the FTC on non-common carrier related actions by companies offering a mix of common carrier and non-common carrier services, the only people who need to panic are Tech Freedom and the rest of the anti-FCC crowd.

 

OTOH, longer term, this does create a more general concern for consumer protection in more deregulated industries (such as airlines) covered by the exemptions in Section 5 of the FTCA. Yes, I know most folks reading this blog think the universe revolves around broadband, but this decision impacts airlines, bus services, private mail services like UPS, and any other company offering a common carrier service “subject to the Acts to regulate Commerce.” (15 U.S.C. 45(a)(2))  (Also meat packers and a few other named exceptions). So while I am hopeful the FTC appeals this to the full Ninth Circuit for en banc review (and even the Supreme Court, if necessary) from a general consumer protection perspective, the only direct result of this case for broadband policy is to underscore how important it is for the FCC to do its job despite the industry nay-sayers and their Libertarian cheerleaders.

 

More below . . .

 

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Tales of the Sausage Factory

Net Neutrality: Tomorrow Is The Judgement Day (Well, Oral Argument).

So here we are. One day more until oral argument on the FCC’s February 2015 decision to reclassify broadband as a Title II telecom service and impose real net neutrality rules. We definitely heard the people sing — 4 million of them sang the songs of very angry broadband subscribers to get us where we are today. But will we see a new beginning? Or will it be every cable company that will be king? Will Judges Tatel and Srinivasen and Senior Judge Williams nip net neutrality in the bud? Or will we finally meet again in freedom in the valley of the Lord?

 

You can read my blog post on the Public Knowledge blog for a summary of the last 15 years of classification/declasification fights, rulemakings, and other high drama. You can read my colleague Kate Forscey’s excellent discussion of the legal issues in this blog post here. This blog post is for all the geeky Tales of the Sausage Factory type factoids you need to know to really enjoy this upcoming round of legal fun and games and impress your friends with your mastery of such details. Thing like, so how do you get in to the court to watch? What opinions have the judges on the panel written that give us a clue? What fun little things to watch for during argument to try to read the tea leaves? I answer these and other fun questions below . . .

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Tales of the Sausage Factory

New D.C. Circuit Decision Knocks Fairly Large Hole In Anti-Net Neutrality Case.

Every now and then, the D.C. Circuit throws you an interesting little curve ball. This opinion issued last week would appear to knock a serious hole in the argument made by the cable and telcos against the FCC’s reclassification of broadband as a Title II telecom service.

 

The case, Home Care Association of America v. Weil (HCAA) addresses the legal question that takes up about a quarter of the main brief for petitioners: does the Brand X decision that the Telecom Act was “ambiguous” mean that the FCC gets deference under the Chevron Doctrine when it reexamines the question in 2015 and comes out the other way? Or can Petitioners argue that the statute is not ambiguous and explicitly precludes the interpretation the FCC now gives it? Under HCAA, the D.C. Circuit appears to find that once the Supreme Court decides a statute is ambiguous, that settles the question. If the statute was ambiguous for an interpretation in one direction, it is still ambiguous — and thus subject to Chevron deference — when the agency reverses course. Nor does the agency have a higher burden when it reverses course then it did when it first made the decision.

 

Good lawyers can always distinguish cases, of course — as can a conservative panel of the D.C. Cir. that wants to find a particular result. Furthermore, Petitioners have lots of other arguments to make that are not impacted by the HCAA decision. Nevertheless, it seems clear this case is good news for the FCC (and those of us who support the FCC), and Petitioners will no doubt need to spend a good portion of their reply brief explaining why HCAA doesn’t dictate the result here.

 

I explain in more detail below . . . .

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Tales of the Sausage Factory

Net Neutrality Litigation: Round 1 Goes To the FCC.

Good news! The D.C. Circuit denied the request by the carriers suing the Federal Communications Commission (FCC) to prevent the FCC’s net neutrality rules and reclassification of broadband as a Title II telecom service. As of today, the Net Neutrality rules are in effect, and broadband access is once again a Title II telecommunications service — pending the final outcome of the lawsuit challenging the the FCC’s actions.

 

Reactions from net neutrality opponents have ranged from defiance to “no biggie” with a side of trying to claim a partial win for getting expedited briefing (I’ll explain below why this is a tad disingenuous). On Twitter, I did see a few of my opposite numbers wailing and gnashing their teeth, at the prospect that their beloved Broadband Equestria ruled by the wise Queen Comcast Celestia and Princess Verizon Twilight Sparkle is now going to be converted into a Hellscape overrun with Tyrannosaurus Tariffs that will devour helpless ISPs like tourists dumb enough to go to Jurassic World. Needless to say, supporters of net neutrality and Title II, like my employer Public Knowledge, have been somewhat more upbeat.

 

So what does all this mean for the litigation and the ongoing machinations in Congress around net neutrality? Short version — the court was not impressed with the arguments of the carriers that the FCC was so whacky crazy power-usurping unlawful that this case is the slam-dunk reversal the carriers and their cheerleaders keep saying it is. Mind you, that doesn’t mean the FCC will win. But it does mean that opponents of net neutrality and Title II might want to ratchet back the TOTAL CONFIDENCE OF VICTORY they have exuded until now just a wee bit. It also provides a psychological lift to the pro-net neutrality side that the FCC can win this even in the D.C. Circuit.

 

On the political side, Republicans had hoped that a stay would push Democrats to the bargaining table to avoid the litigation risk. Because the FCC’s odds improve with the denial of the stay, this may have the opposite effect, with Democrats more likely to wait for a court decision rather than try to strike a deal. This could either prompt Republicans to sweeten their offer, or double down on efforts for total repeal.

 

I provide the longer version below . . .

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Tales of the Sausage Factory

Title II, Robert McDowell, And The Boy Who Cried ‘Black Helicopter.’

I noted with some considerable interest the February 17 Wall St. Journal Op Ed by Former FCC Commissioner Robert McDowell and Gordon M. Goldstein describing how reclassifying broadband as a Title II telecommunications service will invariably lead to “the International Telecommunications Union (ITU), a regulatory arm of the United Nations” asserting jurisdiction over the Internet. As a consequence, McDowell warns us, the ITU will allow freedom-hating dictatorships such as Russia and China to take control of “Internet governance,” extend censorship to the Internet, and generally crush freedom-as-we-know-it.

What I noted, however, was the remarkable similarity between this column and McDowell’s 2010 Wall St. Journal Op Ed on the same theme. “The U.N. Black Helicopters will swoop down and carry off our Internet if we try to reign in carriers from abusing consumers and adopt real net neutrality” has become a perennial favorite for McDowell and some others. We heard the same cries in 2012 as we geared up for the ITU’s World Conference on International Telecommunications (WCIT). In the lead up to the WCIT, the refusal of then-FCC Chairman Julius Genachowski to close the inquiry into whether to reclassify broadband as Title II prompted more than a few anti-net neutrality advocates to claim that supporting Title II, or even just plain ‘ol net neutrality, gave aid and comfort to Russia, China, Iran, etc. in their efforts to use the ITU to take over the Internet.

So no surprise, as we move closer to actually reclassifying broadband and getting strong network neutrality rules in place, it is time once again for the annual reunion tour of Robert McDowell and the Black Helicopter Band. Despite making the same wrong prediction about the ITU for the last 5 years, we will once again see Robert McDowell and the usual suspects singing backup that reclassifying broadband will serve the nefarious agenda of Russia, China and anyone else we don’t like by allowing the U.N. to swoop in with their black helicopters and carry off our Internet and crush our freedoms.

For those new to this performance, I debunk it (once again) below . . .

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Tales of the Sausage Factory

Title II Doesn’t Give FCC New Rate Regulation Powers — For One Thing, Section 706 Already Did That.

As we get closer to the Federal Communication Commission (FCC) historic vote on reclassifying broadband as Title II, we descend further into a phenomena I refer to as #broadbandghazi. Crazy conspiracy theories and wild allegations abound, with the faithful ever insisting that the latest revelation proves, PROVES I SAY, the nefariousness of the evil dictator and tyrant Obama. The very fact that there is no actual evidence only proves how NEFARIOUS and EVIL are his ObamaPlans ™, etc.

 

Case in point, the oft repeated meme by opponents of Title II that Section 201 — by its very nature — imposes “utility style rate regulation” on broadband. Commissioner Pai, who has come to exceed even his usual histrionics on this particular subject, dramatically and repeatedly pushed this meme at his recent press conference. “The American people are being misled by about President Obama’s plan to regulate the Internet,” dramatically declaimed Pai, not sounding in the least like a crazed-conspiracy theorist. (And no, I’m not exaggerating, that actually was his opening line. See his statement here.) “the claim that President Obama’s Plan to regulate the Internet does not include rate regulation is flat out false.” (emphasis in original, *sigh*) When pressed to explain whether he accused Chairman Wheeler of being a liar, Pai demurred slightly, explaining that while everything Wheeler said about forbearing from the explicit price regulation statutes, Section 201(b) (47 U.S.C. 201(b)), by prohibiting all rates and practices that are “unjust and unreasonable,” by its very nature imposes “utility style price regulation” on broadband since it would allow people to bring complaints that the price charged is unjust and unreasonable. Q.E.D. Accordingly, no matter what the FCC Order actually forbears from or says, PRICE REGULATION IS COMING!! BE AFRAID AMERICA!! UTILITY! UTILITY! Pai in particular points out that the proposed Order will — *gasp* — allow consumers to file complaints and even use the courts if broadband providers rip them off with unjust or unreasonable rates and practices. “The plan repeatedly invites complaints from end users and edge providers alike,” warns Pai, apparently unaware that most people like the idea of a consumer protection agency like the FCC being authorized to take complaints when companies screw them over with unjust and unreasonable rates (as demonstrated by this delightful “Ode to Comcast (while waiting for the cable guy)”).

 

A few problems with this argument. First and foremost, Section 706 (47 U.S.C. 1302(a)) explicitly directs the FCC to use “price caps” to promote broadband deployment. In fact, if you go read the statute, price caps are the first explicit authority the FCC is already directed to use under Section 706. Keep in mind that Section 706 applies to broadband already under Title I. So to the extent the argument is based on the idea that language in 201 adds new authority, this argument fails. The explicit directive in Section 706 for the FCC to use price caps as direct rate regulation far exceeds any secret plan to regulate prices by implication from the language in Section 201 despite lots of forbearance to the contrary.

 

Indeed, given the explicit price cap language in Section 706, the FCC forbearance from future price regulation tied to reclassification actually reduces the likelihood of “utility style rate regulation” from the existing Section 706 authority (because, as I discussed back in this blog post on forbearance, the FCC can actually forbear from future obligations that don’t exist yet).

 

There are lots of other problems with this argument as well, as Politifact found when Ted Cruz first raised it back in November. So I elaborate on all the reasons the “Section 201 means utility style price regulation” is bogus #broadbandghazi conspiracy mongering below. . . .

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Tales of the Sausage Factory

Title II And The Return of the “Gore Tax.” Or, The Debate We Should Be Having.

Hal Singer and Robert Litan over at Progressive Policy Institute caused some stir recently with this paper claiming that if the Federal Communications Commission (FCC) reclassifies broadband as a Title II telecommunications service, it will tack on over $15 billion in new state taxes, fees and federal universal service charges. As Free Press already pointed out, (a) Congress extending the Internet Tax Freedom Act (ITFA) in the recent “CRomnibus” funding bill” takes the state tax issue off the table; and (b) even without ITFA, the PPI Report made a lot of questionable assumptions to reach their high number.

 

Update: Senator Ron Wyden (D-OR), one of the drafters of the IFTA extension, has this short but forceful statement about the claims that reclassifying broadband as Title II will allow states to tax broadband access despite IFTA. “Baloney.”

 

Happily, the ITFA extension lets us blow past the debate about whether states even use the FCC definition of “telecommunications” for revenue services (many don’t, see, e.g., this tax letter from Tennessee as an example). We can cut right to the chase on the big thing ITFA doesn’t cover — Universal Service Fund (USF). Here again, I want to blow past the question of the numbers used by PPI (which rely on a set of assumptions that amount to what we call in the trade a SWAG (“scientific wild ass guess”)) and focus on the debate we should be having — do we still believe in Universal Service or not?

 

If we no longer believe in Universal Service as a fundamental principle, fine. Lets own that and end the program. If we do believe in the principle of universal service, and we agree that broadband is the critical communications medium of the 21st Century, it makes no sense to play tax arbitrage games with definitions. The FCC continues to play silly, complicated games with the Connect America Fund (CAF) because everyone wants to redirect USF support to broadband but nobody wants to include broadband in the contribution base. As a result, an increasingly smaller base of voice services is supporting an increasingly larger set of overall services. This makes no sense and is inherently unsustainable.

 

As I explain below, this isn’t the first time we’ve debated the importance of universal service and whether we care enough about it to pay for it. Nor will reclassification trigger some sort of “sticker shock,” as the PPI paper suggests. Instead, as I explain below, reclassification is the prelude to the real debate we need to have on whether we still believe in the fundamental principle of service to all Americans, or not.

 

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